[Mission 2022] QUIZ – 2022: INSIGHTS STATIC QUIZ, 14 March 2022 – Economy – INSIGHTSIAS

Solution: b)

The GDP deflator, also called implicit price deflator, is a measure of inflation. It is the ratio of the value of goods and services an economy produces in a particular year at current prices to that of prices that prevailed during the base year.

This ratio helps show the extent to which the increase in gross domestic product has happened on account of higher prices rather than increase in output.

Since the deflator covers the entire range of goods and services produced in the economy — as against the limited commodity baskets for the wholesale or consumer price indices — it is seen as a more comprehensive measure of inflation.

Solution: b)

In India, the most important category in the consumer price index is Food and beverages which has highest weight in CPI rural and CPI urban.

Solution: d)

The labour participation rate (LPR) for April 2021, at 40%, remained lower than the levels seen before last year’s lockdown. Labour participation helps measure the section of the population that is willing to take on jobs. Unemployment is a subset, which helps in giving a measure of those who are willing to take on jobs but are not employed.

Solution: c)

Major traits of recession, to a great extent, are similar to that of ‘depression’—may be summed up as follows:

(i) there is a general fall in demand as economic activities takes a downturn;

(ii) inflation remains lower or/and shows further signs of falling down;

(iii) employment rate falls/unemployment rate grows; 

(iv) Industries resort to ‘price cuts’ to sustain their business.

Solution: d)

Inflation, the steady rise of prices for goods and services over a period, has many effects, good and bad.

Inflation erodes purchasing power or how much of something can be purchased with currency.

Because inflation erodes the value of cash, it encourages consumers to spend and stock up on items that are slower to lose value.

It lowers the cost of borrowing and reduces unemployment.