2015 GS Paper I, all questions
UPSC Prelims 2015 · GS Paper I
Question 87: Economy and Social Development
With reference to inflation in India, which of the following statements is correct?
aControlling the inflation in India is the responsibility of the Government of India only
bThe Reserve Bank of India has no role in controlling the inflation
cDecreased money circulation helps in controlling the inflation
dIncreased money circulation helps in controlling the inflation
AnswerUPSC’s answer is (c).
Inflation means too much money chasing too few goods, so reducing the money in circulation lowers demand and helps control price rise. Both the government, through fiscal policy and supply management, and the Reserve Bank, through monetary policy, share responsibility, so options saying only the government is responsible or that the RBI has no role are wrong. More money in circulation fuels inflation.
Why each option is right or wrong
- (a) The RBI also controls inflation through monetary policy, so the responsibility is shared.
- (b) The RBI plays a central role, through interest rates and money supply.
- (c) Correct: reduced money circulation reduces demand and eases inflation.
- (d) More money in circulation raises demand and prices.
Answer: UPSC’s key. Explanation: written by UPSC Grade, not by UPSC.
Source: UPSC, Civil Services (Preliminary) Examination 2015, General Studies Paper I, Series A. The paper on upsc.gov.in.