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What best characterizes the concept of “entrenched inflation”?
- a)A temporary increase in prices due to seasonal fluctuations in demand.
- b)Persistent and sustained rise in the general price level of goods and services over a prolonged period.
- c)An abrupt and short-lived spike in inflation caused by external shocks to the economy.
- d)Fluctuations in prices resulting from changes in consumer preferences and tastes.
Correct answer is option 'B'. Can you explain this answer?
Verified Answer
What best characterizes the concept of “entrenched inflation&rdq...
- Context: In 2023, while world food prices experienced a significant decline from their 2022 highs, India saw persistently high food inflation, reaching 9.5% in December 2023. This contrasts sharply with global deflation of -10.1% during the same period.
- If inflation were entrenched, it would mean that prices would not come back down, and that the new prices we see in the market would be a more permanent fixture in the economic life of citizens.
- Entrenched inflation tends to stick around even after the immediate problems that spurred it on have resolved.
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What best characterizes the concept of “entrenched inflation&rdq...
Understanding Entrenched Inflation
Entrenched inflation refers to a situation where inflation becomes a persistent and sustained issue within an economy. This concept is crucial for understanding long-term economic conditions and their impact on consumers, businesses, and policymakers.
Key Characteristics of Entrenched Inflation:
- Persistent Price Increases:
Entrenched inflation is characterized by a continuous rise in the general price level of goods and services over an extended period. Unlike temporary inflation spikes, entrenched inflation indicates a systemic issue within the economy.
- Expectations of Future Inflation:
When inflation is entrenched, businesses and consumers begin to expect ongoing price increases. This expectation can lead to a self-fulfilling cycle where businesses raise prices preemptively, and workers demand higher wages to keep up with the rising cost of living.
- Impact on Economic Stability:
Sustained inflation can erode purchasing power, reducing consumer spending and potentially leading to economic stagnation. It complicates monetary policy as central banks may struggle to control inflation without stifling economic growth.
- Difficulties in Economic Management:
Policymakers face challenges in addressing entrenched inflation, as simply raising interest rates may not be sufficient. A holistic approach may be needed to tackle the underlying causes, which could include supply chain issues, labor market dynamics, and fiscal policies.
In summary, entrenched inflation is not a fleeting phenomenon but a long-lasting challenge that requires careful management and strategic interventions to stabilize the economy.
Entrenched inflation refers to a situation where inflation becomes a persistent and sustained issue within an economy. This concept is crucial for understanding long-term economic conditions and their impact on consumers, businesses, and policymakers.
Key Characteristics of Entrenched Inflation:
- Persistent Price Increases:
Entrenched inflation is characterized by a continuous rise in the general price level of goods and services over an extended period. Unlike temporary inflation spikes, entrenched inflation indicates a systemic issue within the economy.
- Expectations of Future Inflation:
When inflation is entrenched, businesses and consumers begin to expect ongoing price increases. This expectation can lead to a self-fulfilling cycle where businesses raise prices preemptively, and workers demand higher wages to keep up with the rising cost of living.
- Impact on Economic Stability:
Sustained inflation can erode purchasing power, reducing consumer spending and potentially leading to economic stagnation. It complicates monetary policy as central banks may struggle to control inflation without stifling economic growth.
- Difficulties in Economic Management:
Policymakers face challenges in addressing entrenched inflation, as simply raising interest rates may not be sufficient. A holistic approach may be needed to tackle the underlying causes, which could include supply chain issues, labor market dynamics, and fiscal policies.
In summary, entrenched inflation is not a fleeting phenomenon but a long-lasting challenge that requires careful management and strategic interventions to stabilize the economy.
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What best characterizes the concept of “entrenched inflation”?a)A temporary increase in prices due to seasonal fluctuations in demand.b)Persistent and sustained rise in the general price level of goods and services over a prolonged period.c)An abrupt and short-lived spike in inflation caused by external shocks to the economy.d)Fluctuations in prices resulting from changes in consumer preferences and tastes.Correct answer is option 'B'. Can you explain this answer?
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What best characterizes the concept of “entrenched inflation”?a)A temporary increase in prices due to seasonal fluctuations in demand.b)Persistent and sustained rise in the general price level of goods and services over a prolonged period.c)An abrupt and short-lived spike in inflation caused by external shocks to the economy.d)Fluctuations in prices resulting from changes in consumer preferences and tastes.Correct answer is option 'B'. Can you explain this answer? for UPSC 2025 is part of UPSC preparation. The Question and answers have been prepared according to the UPSC exam syllabus. Information about What best characterizes the concept of “entrenched inflation”?a)A temporary increase in prices due to seasonal fluctuations in demand.b)Persistent and sustained rise in the general price level of goods and services over a prolonged period.c)An abrupt and short-lived spike in inflation caused by external shocks to the economy.d)Fluctuations in prices resulting from changes in consumer preferences and tastes.Correct answer is option 'B'. Can you explain this answer? covers all topics & solutions for UPSC 2025 Exam. Find important definitions, questions, meanings, examples, exercises and tests below for What best characterizes the concept of “entrenched inflation”?a)A temporary increase in prices due to seasonal fluctuations in demand.b)Persistent and sustained rise in the general price level of goods and services over a prolonged period.c)An abrupt and short-lived spike in inflation caused by external shocks to the economy.d)Fluctuations in prices resulting from changes in consumer preferences and tastes.Correct answer is option 'B'. Can you explain this answer?.
What best characterizes the concept of “entrenched inflation”?a)A temporary increase in prices due to seasonal fluctuations in demand.b)Persistent and sustained rise in the general price level of goods and services over a prolonged period.c)An abrupt and short-lived spike in inflation caused by external shocks to the economy.d)Fluctuations in prices resulting from changes in consumer preferences and tastes.Correct answer is option 'B'. Can you explain this answer? for UPSC 2025 is part of UPSC preparation. The Question and answers have been prepared according to the UPSC exam syllabus. Information about What best characterizes the concept of “entrenched inflation”?a)A temporary increase in prices due to seasonal fluctuations in demand.b)Persistent and sustained rise in the general price level of goods and services over a prolonged period.c)An abrupt and short-lived spike in inflation caused by external shocks to the economy.d)Fluctuations in prices resulting from changes in consumer preferences and tastes.Correct answer is option 'B'. Can you explain this answer? covers all topics & solutions for UPSC 2025 Exam. Find important definitions, questions, meanings, examples, exercises and tests below for What best characterizes the concept of “entrenched inflation”?a)A temporary increase in prices due to seasonal fluctuations in demand.b)Persistent and sustained rise in the general price level of goods and services over a prolonged period.c)An abrupt and short-lived spike in inflation caused by external shocks to the economy.d)Fluctuations in prices resulting from changes in consumer preferences and tastes.Correct answer is option 'B'. Can you explain this answer?.
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