Inflation occurs when too much money is chasing too few goods. The prevailing view in mainstream economics is that inflation is caused by the interaction of the supply of money with output and interest rates. In general, mainstream economists divide into two camps: those who believe that monetary effects dominate all others in setting the rate of inflation, or broadly speaking, monetarists, and those who believe that the interaction of money, interest and output dominate over other effects, or broadly speaking Keynesians. Other theories, such as those of the Austrian school of economics, believe that inflation of the general price level and of specific prices is a result from an increase in the supply of money by central banking authorities.

Correct Option: B

Inflation occurs when too much money is chasing too few goods. The prevailing view in mainstream economics is that inflation is caused by the interaction of the supply of money with output and interest rates. In general, mainstream economists divide into two camps: those who believe that monetary effects dominate all others in setting the rate of inflation, or broadly speaking, monetarists, and those who believe that the interaction of money, interest and output dominate over other effects, or broadly speaking Keynesians. Other theories, such as those of the Austrian school of economics, believe that inflation of the general price level and of specific prices is a result from an increase in the supply of money by central banking authorities.

In economics, inflation is a rise in the general level of prices of goods and services in an economy over a period of time. In other words, inflation means continuously decrease in the value of money due to excess supply of money in the market. There are two types of inflation demand pull and cost push inflation. Causes behind inflation are reduced taxes, rate decrease in saving, increase in supply of goods, increase in the number of producers in the market. To control inflation there should be an increase in the tax rate and increase in the interest rate.

Correct Option: A

In economics, inflation is a rise in the general level of prices of goods and services in an economy over a period of time. In other words, inflation means continuously decrease in the value of money due to excess supply of money in the market. There are two types of inflation demand pull and cost push inflation. Causes behind inflation are reduced taxes, rate decrease in saving, increase in supply of goods, increase in the number of producers in the market. To control inflation there should be an increase in the tax rate and increase in the interest rate.

The full convertibility of the Indian currency means that the rupee would be made freely exchangeable into other currencies and vice versa. The rupee was made partially convertible in 1994. Currently, it can be changed freely into foreign currency for business and trade expenses but not freely for activities like acquiring overseas assets. Full converted of the currency means the local currency can be exchanged to foreign currency without any governmental con-trol. Presently, the issue of capital account con-vertibility is in the discussion stage.

Correct Option: D

The full convertibility of the Indian currency means that the rupee would be made freely exchangeable into other currencies and vice versa. The rupee was made partially convertible in 1994. Currently, it can be changed freely into foreign currency for business and trade expenses but not freely for activities like acquiring overseas assets. Full converted of the currency means the local currency can be exchanged to foreign currency without any governmental con-trol. Presently, the issue of capital account con-vertibility is in the discussion stage.

In economics, stagflation is a situation in which the inflation rate is high, the economic growth rate slows down, and unemployment remains steadily high. Stagflation occurs when the economy isn’t growing but prices are, which is not a good situation for a country to be in. This happened to a great extent during the 1970s, when world oil prices rose dramatically, fueling sharp inflation in developed countries. For these countries, including the U.S., stagnation increased the inflationary effects.

Correct Option: D

In economics, stagflation is a situation in which the inflation rate is high, the economic growth rate slows down, and unemployment remains steadily high. Stagflation occurs when the economy isn’t growing but prices are, which is not a good situation for a country to be in. This happened to a great extent during the 1970s, when world oil prices rose dramatically, fueling sharp inflation in developed countries. For these countries, including the U.S., stagnation increased the inflationary effects.

Devaluation in modern monetary policy is a reduction in the value of a currency with respect to those goods, services or other monetary units with which that currency can be exchanged. There are two implications for currency devaluation. First, devaluation makes a country’s exports relatively less expensive for foreigners and second, it makes foreign products relatively more expensive for domestic consumers, discouraging imports. As a result, this may help to reduce a country’s trade deficit. Import substitution means promotion of export to replace imports. It is also fallout of devaluation.

Correct Option: D

Devaluation in modern monetary policy is a reduction in the value of a currency with respect to those goods, services or other monetary units with which that currency can be exchanged. There are two implications for currency devaluation. First, devaluation makes a country’s exports relatively less expensive for foreigners and second, it makes foreign products relatively more expensive for domestic consumers, discouraging imports. As a result, this may help to reduce a country’s trade deficit. Import substitution means promotion of export to replace imports. It is also fallout of devaluation.