UPSC Exam > UPSC Questions > Consider the following statements with refer...
Start Learning for Free
Consider the following statements with reference to inflation:
Inflation reduces the purchasing power of the currency.
Producers are worst affected by inflation.
Which of the statements given above is/are correct?
- a)1 only
- b)2 only
- c)Both 1 and 2
- d)Neither 1 nor 2
Correct answer is option 'A'. Can you explain this answer?
| FREE This question is part of | Download PDF Attempt this Test |
Most Upvoted Answer
Consider the following statements with reference to inflation: In...
Understanding Inflation and Its Effects
Inflation is a critical economic concept that impacts currency value and purchasing power. Let’s evaluate the given statements regarding inflation.
Statement 1: Inflation reduces the purchasing power of the currency.
- This statement is correct.
- As inflation rises, the value of money decreases, meaning consumers can buy fewer goods and services with the same amount of money.
- Higher prices lead to diminished purchasing power, which negatively affects consumers as they have to spend more to maintain their standard of living.
Statement 2: Producers are worst affected by inflation.
- This statement is incorrect.
- While producers can face challenges due to rising costs of inputs and materials, they can also benefit from inflation if they are able to increase prices for their products.
- Many producers can pass on increased costs to consumers, thereby maintaining or even improving profit margins.
- Additionally, businesses that hold assets may see their value appreciate with inflation.
Conclusion
- Based on the analysis, only the first statement is correct, making the answer option 'A' – 1 only.
- Understanding the nuanced effects of inflation on different economic agents is crucial for grasping its overall impact on the economy.
In summary, inflation primarily affects purchasing power negatively, while the impact on producers can vary depending on their ability to manage costs and pricing strategies.
Inflation is a critical economic concept that impacts currency value and purchasing power. Let’s evaluate the given statements regarding inflation.
Statement 1: Inflation reduces the purchasing power of the currency.
- This statement is correct.
- As inflation rises, the value of money decreases, meaning consumers can buy fewer goods and services with the same amount of money.
- Higher prices lead to diminished purchasing power, which negatively affects consumers as they have to spend more to maintain their standard of living.
Statement 2: Producers are worst affected by inflation.
- This statement is incorrect.
- While producers can face challenges due to rising costs of inputs and materials, they can also benefit from inflation if they are able to increase prices for their products.
- Many producers can pass on increased costs to consumers, thereby maintaining or even improving profit margins.
- Additionally, businesses that hold assets may see their value appreciate with inflation.
Conclusion
- Based on the analysis, only the first statement is correct, making the answer option 'A' – 1 only.
- Understanding the nuanced effects of inflation on different economic agents is crucial for grasping its overall impact on the economy.
In summary, inflation primarily affects purchasing power negatively, while the impact on producers can vary depending on their ability to manage costs and pricing strategies.
Free Test
FREE
| Start Free Test |
Community Answer
Consider the following statements with reference to inflation: In...
- Inflation is a quantitative measure of the rate at which the average price level of a basket of selected goods and services in an economy increases over some period of time.
- All else being equal, inflation decreases the amount of goods or services you would be able to purchase. Inflation reduces the value of a currency's purchasing power, having the effect of an increase in prices.
- Consumers are worst affected by rise in prices or inflation. Consumers will have to pay more for the rising cost of products due to the declining purchasing power of the currency. Increase in spending due to inflation would also eat into the savings of the poor and middle-income group. Thus poor and middle-income group are worst affected by the rise in the price level. Hence, statement 1 is correct.
- Most commonly used inflation indexes are the Consumer Price Index (CPI) and the Wholesale Price Index (WPI).
- Deflation is a general decline in prices for goods and services, typically associated with a contraction in the supply of money and credit in the economy. During deflation, the purchasing power of currency rises over time. Producers are worst affected by fall in prices or deflation. Their profit level falls due to fall in prices forcing them to reduce investment. Hence, statement 2 is not correct.
Attention UPSC Students!
To make sure you are not studying endlessly, EduRev has designed UPSC study material, with Structured Courses, Videos, & Test Series. Plus get personalized analysis, doubt solving and improvement plans to achieve a great score in UPSC.
|
Explore Courses for UPSC exam
|
|
Similar UPSC Doubts
Top Courses for UPSCView all
Consider the following statements with reference to inflation: Inflation reduces the purchasing power of the currency. Producers are worst affected by inflation. Which of the statements given above is/are correct?a)1 onlyb)2 onlyc)Both 1 and 2d)Neither 1 nor 2Correct answer is option 'A'. Can you explain this answer?
Question Description
Consider the following statements with reference to inflation: Inflation reduces the purchasing power of the currency. Producers are worst affected by inflation. Which of the statements given above is/are correct?a)1 onlyb)2 onlyc)Both 1 and 2d)Neither 1 nor 2Correct answer is option 'A'. Can you explain this answer? for UPSC 2024 is part of UPSC preparation. The Question and answers have been prepared according to the UPSC exam syllabus. Information about Consider the following statements with reference to inflation: Inflation reduces the purchasing power of the currency. Producers are worst affected by inflation. Which of the statements given above is/are correct?a)1 onlyb)2 onlyc)Both 1 and 2d)Neither 1 nor 2Correct answer is option 'A'. Can you explain this answer? covers all topics & solutions for UPSC 2024 Exam. Find important definitions, questions, meanings, examples, exercises and tests below for Consider the following statements with reference to inflation: Inflation reduces the purchasing power of the currency. Producers are worst affected by inflation. Which of the statements given above is/are correct?a)1 onlyb)2 onlyc)Both 1 and 2d)Neither 1 nor 2Correct answer is option 'A'. Can you explain this answer?.
Consider the following statements with reference to inflation: Inflation reduces the purchasing power of the currency. Producers are worst affected by inflation. Which of the statements given above is/are correct?a)1 onlyb)2 onlyc)Both 1 and 2d)Neither 1 nor 2Correct answer is option 'A'. Can you explain this answer? for UPSC 2024 is part of UPSC preparation. The Question and answers have been prepared according to the UPSC exam syllabus. Information about Consider the following statements with reference to inflation: Inflation reduces the purchasing power of the currency. Producers are worst affected by inflation. Which of the statements given above is/are correct?a)1 onlyb)2 onlyc)Both 1 and 2d)Neither 1 nor 2Correct answer is option 'A'. Can you explain this answer? covers all topics & solutions for UPSC 2024 Exam. Find important definitions, questions, meanings, examples, exercises and tests below for Consider the following statements with reference to inflation: Inflation reduces the purchasing power of the currency. Producers are worst affected by inflation. Which of the statements given above is/are correct?a)1 onlyb)2 onlyc)Both 1 and 2d)Neither 1 nor 2Correct answer is option 'A'. Can you explain this answer?.
Solutions for Consider the following statements with reference to inflation: Inflation reduces the purchasing power of the currency. Producers are worst affected by inflation. Which of the statements given above is/are correct?a)1 onlyb)2 onlyc)Both 1 and 2d)Neither 1 nor 2Correct answer is option 'A'. Can you explain this answer? in English & in Hindi are available as part of our courses for UPSC.
Download more important topics, notes, lectures and mock test series for UPSC Exam by signing up for free.
Here you can find the meaning of Consider the following statements with reference to inflation: Inflation reduces the purchasing power of the currency. Producers are worst affected by inflation. Which of the statements given above is/are correct?a)1 onlyb)2 onlyc)Both 1 and 2d)Neither 1 nor 2Correct answer is option 'A'. Can you explain this answer? defined & explained in the simplest way possible. Besides giving the explanation of
Consider the following statements with reference to inflation: Inflation reduces the purchasing power of the currency. Producers are worst affected by inflation. Which of the statements given above is/are correct?a)1 onlyb)2 onlyc)Both 1 and 2d)Neither 1 nor 2Correct answer is option 'A'. Can you explain this answer?, a detailed solution for Consider the following statements with reference to inflation: Inflation reduces the purchasing power of the currency. Producers are worst affected by inflation. Which of the statements given above is/are correct?a)1 onlyb)2 onlyc)Both 1 and 2d)Neither 1 nor 2Correct answer is option 'A'. Can you explain this answer? has been provided alongside types of Consider the following statements with reference to inflation: Inflation reduces the purchasing power of the currency. Producers are worst affected by inflation. Which of the statements given above is/are correct?a)1 onlyb)2 onlyc)Both 1 and 2d)Neither 1 nor 2Correct answer is option 'A'. Can you explain this answer? theory, EduRev gives you an
ample number of questions to practice Consider the following statements with reference to inflation: Inflation reduces the purchasing power of the currency. Producers are worst affected by inflation. Which of the statements given above is/are correct?a)1 onlyb)2 onlyc)Both 1 and 2d)Neither 1 nor 2Correct answer is option 'A'. Can you explain this answer? tests, examples and also practice UPSC tests.
|
|
Explore Courses for UPSC exam
|
|
Suggested Free Tests
Signup for Free!
Signup to see your scores go up within 7 days! Learn & Practice with 1000+ FREE Notes, Videos & Tests.
|
© EduRev
|
Education Revolution
|
Follow Us
|
Signup to see your scores
go up within 7 days!
Access 1000+ FREE Docs, Videos and Tests
Takes less than 10 seconds to signup