Daily Quiz : UPSC Prelims Marathon – February 7

mishthi

May 16, 2017

4 of 5 questions answered correctly

Your time: 00:00:46

You have reached 4 of 5 scores, (80%)

Best desire

February 10, 2017

No i was not rude but i asked apology because i am not present there in front of you so you can not judge the intentions…..or can misinterpret by worrds written:-)

Well we all are learners and gaining from each other’s:-)

Please keep pointing out mistakes, so that every1 can gain sometging .

ALL THE BEST 🙂

Bhavika

February 9, 2017

Cost push inflation occurs when we experience rising prices due to higher costs of production and higher costs of raw materials. Cost push inflation is determined by supply side factors (cost-push inflation is different to demand-pull inflation which occurs due to aggregate demand growing faster than aggregate supply)

Causes of Cost Push Inflation

1.Higher Price of Commodities. A rise in the price of oil would lead to higher petrol prices and higher transport costs. All firms would see some rise in costs. As the most important commodity, higher oil prices often lead to cost push inflation (e.g. 1970s, 2008, 2010-11)

2.Imported Inflation. A devaluation will increase the domestic price of imports. Therefore, after a devaluation we often get an increase in inflation due to rising cost of imports.

3.Higher Wages. Wages are one of the main costs facing firms. Rising wages will push up prices as firms have to pay higher costs (higher wages may also cause rising demand)

4.Higher Taxes. Higher VAT and Excise duties will increase the prices of goods. This price increase will be a temporary increase.
Higher Food Prices. In western economies food is a smaller % of overall spending, but in developing countries, it plays a bigger role

Policies to Reduce Cost Push Inflation

Policies to reduce cost push inflation are essentially the same as policies to reduce demand pull inflation.

The government could pursue deflationary fiscal policy (higher taxes, lower spending) or monetary authorities could increase interest rates. This would increase cost of borrowing and reduce consumer spending and investment.

Some other measures–
>increasing production and productivity(help by govt in the form of subsidies, latest technology, raw material etc to consumer goods sector)
> rational wage & income policy-the govt freezes the wages, incomes, profits, dividends, bonus etc
> price control and rationing i.e. fixing an upper limit for prices of essential consumer goods
> Rationing-distributing consumption of scarce goods(essential consumer goods such as wheat, rice etc) to make them available to a large number of consumers(assuring distributive justice)and stabilize prices. Like the PDS we have.

The problem with using higher interest rates is that although it will reduce inflation it could lead to a big fall in GDP.

For example, in early 2008, we had a high period of inflation (5%) due to rising oil and food prices. Central banks kept interest rates high, but this pushed the economy into recession. Arguably, interest rates should have been lower and less importance attached to reducing cost push inflation.

The long term solution to cost push inflation could be better supply side policies which help to increase productivity But, these policies would take a long time to have an effect.

MYK

February 8, 2017

4/5

Alok Kumar

February 8, 2017

Thanks forum for providing this quiz.
One more suggestion that please provide solution for each question even if that question is very simple.Because there might be people who must be knowing the answer but then again there will be people called newbie like me.
Suggestion not binding on Forumias.

CSE2017 aspirant (ABG)

February 8, 2017

Mrunal _/_
Thanks

CSE2017 aspirant (ABG)

February 8, 2017

yo baby – Exam is near and we need to be in full form

CSE2017 aspirant (ABG)

February 8, 2017

Hmm, right – Statement here mentions the TARGET FAILURE
TARGET is failed when inflation remains more than 6% or less than 2% for three successive quarters.

Now, if the RBI fails to achieve the target , it shall present a report to the government containing the estimates of the time period within which the targets would be achieved – this is what statement 2 says —-> Hence, it is correct.

Thanks for sharing the fact with me – I did not concentrate on successive failure for 3 quarters waala fact – will remember it now 🙂

Simplex

February 8, 2017

Daily Quiz – February 7
Results

1 of 5 questions answered correctly

Your time: 00:02:17

Undercover@gent

Daily Quiz : UPSC Prelims Marathon – February 7

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