Daily Quiz #1 UPSC Prelims Marathon – October 1, 2019

Explanation: This nomenclature is based on the inclusion or exclusion of the goods and services while calculating inflation. Popular in western economies, core inflation shows price rise in all goods and services excluding energy and food articles. In India, it was first time used in the financial year 2000–01 when the government expressed that it was under control—it means the prices of manufactured goods were under control. This was criticized by experts on account of excluding food articles and energy out of the inflation and feeling satisfied on the inflation front. Basically, in the western economies, food and energy are not the problems for the masses, while in India these two segments are of most vital importance for the common people.

Explanation: This is a ‘very high inflation’ running in the range of double-digit or triple digit (i.e., 20 per cent, 100 per cent or 200 per cent in a year). In the decades of 1970s and 1980s, many Latin American countries such as Argentina, Chile and Brazil had such rates of inflation—in the range of 50 to 700 per cent. The Russian economy did show such inflation after the disintegration of the ex-USSR in the late 1980s. Contemporary journalism has given some other names to this inflation —hopping inflation, jumping inflation and running or runaway inflation.

Explanation: Decadal inflation in India looks comparatively normal with reference to many developing economies. But it has sporadic incidences of double-digit tendencies mainly due to supply-side shortfalls caused by droughts (monsoon failures), price rise of crude oil in the international market or fund diversions due to wars (the Chinese war of 1962 and the Pakistan wars of 1965–66 and 1971).The decadal inflation in India has been as given below:
(i) During 1950s: remained at 1.7 per cent.
(ii) During 1960s: remained at 6.4 per cent.
(iii) During 1970s: remained at 9.0 per cent.
(iv) During 1980s: remained at 8.0 per cent.
(v) During 1990s: remained at 9.5 per cent (though it reached 0.5 per cent by the fourth quarter of the fiscal 1998–99)

Explanation: Economists have pointed out that the business cycle is characterised by four phases or stages in which economies alternate:
(i) Depression
(ii) Recovery
(iii) Boom
(iv) Recession

Explanation: Though depression has visited the world economy only once in 1929, economists have pin-pointed enough number of traits to recognise it. The major traits of depression could be as given below:
(i) an extremely low aggregate demand in the economy causes activities to decelerate;
(ii) the inflation being comparatively lower;
(iii) the employment avenues start shrinking forcing unemployment rate to grow fast;
(iv) to keep the business going, production houses go for forced labour-cuts or retrenchment (to cut down production cost and be competitive in the market,) etc.
The economic situations become so chaotic in the phase of depression that governments have almost no control over the economy. The Great Depression of 1929 gave rise to the ideas of strong government Intervention in the economy, such as deficit financing, monetary management, etc.