Q. Consider the following statements about the inflation:
1. Creditors lose and debtors gain in the condition of inflation.
2. It makes corporations and consumers less likely to spend.
3. Domestic products become more competitive due to inflation.
Which of the statements given above is/are correct?
Answer: D
Notes:
Explanation: Objectives or Goals of Monetary Policy:
- Full Employment: Full employment has been ranked among the foremost objectives of monetary policy. It is an important goal not only because unemployment leads to wastage of potential output, but also because of the loss of social standing and self-respect.
- Price Stability: One of the policy objectives of monetary policy is to stabilise the price level. Both economists and laymen favour this policy because fluctuations in prices bring uncertainty and instability to the economy.
- Economic Growth: One of the most important objectives of monetary policy in recent years has been the rapid economic growth of an economy. Economic growth is defined as “the process whereby the real per capita income of a country increases over a long period of time.”
- Balance of Payments: Another objective of monetary policy since the 1950s has been to maintain equilibrium in the balance of payments.
Source: Ramesh Singh
