UPSC CSE Prelims
Inflation Control Measures Previous Year Questions (PYQs)
Practice solved questions for Inflation Control Measures with detailed step-by-step solutions, key insights, and trend analysis for UPSC CSE PRELIMS.
Solved Previous Year Questions
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With reference to inflation in India, which of the following statements is correct?
Detailed Explanation:
✅ Statement 3 – Correct: Decreased money circulation (contractionary monetary policy) reduces aggregate demand and liquidity in the economy, which helps control demand-pull inflation.
❌ Statement 1 – Incorrect: Controlling inflation is a joint responsibility of both the Government of India (fiscal policy, supply-side measures) and the Reserve Bank of India (monetary policy).
❌ Statement 2 – Incorrect: The RBI plays a central role through the Monetary Policy Committee (MPC), which adjusts policy rates (Repo rate) to maintain the inflation target of 4% ± 2% under the RBI Act, 1934.
❌ Statement 4 – Incorrect: Increased money circulation raises aggregate demand, which if not matched by supply, leads to demand-pull inflation.
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