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22 Jul 2011, 23:04
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Inflation is an economic phenomenon resulting from the incongruence between demand for and supply of money effecting a general rise in the price level.
In the context of the above statement, which one of the following is true?
A) Inflation results in rise in price.
B) Inflation means a general rise in price level.
C) Inflation results in excess supply of money.
D) Inflation is cause mismatch of demand for and supply of money.
E) Mismatch in the demand and supply of money resulting in a rise in the general price-index causes inflation.
In the context of the above statement, which one of the following is true?
A) Inflation results in rise in price.
B) Inflation means a general rise in price level.
C) Inflation results in excess supply of money.
D) Inflation is cause mismatch of demand for and supply of money.
E) Mismatch in the demand and supply of money resulting in a rise in the general price-index causes inflation.
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22 Jul 2011, 23:35
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+ 1 A
28 Jul 2011, 03:28
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A tricky one, for sure.
(A): Inflation does not result in price rise. Price rise results in inflation. Incorrect.
(B): Inflation does not mean a general rise in price level. The question lists just one way for the price level to increase. There may be others. Incorrect.
(C): Nowhere does the question stem say that inflation results in excess supply of money. Incorrect.
(D): CORRECT. Inflation is caused by the mismatch between the demand for and supply of money.
(E): Inflation is caused when the price level rises (caused by a mismatch between demand for and supply of money), not the price index. Incorrect.
(A): Inflation does not result in price rise. Price rise results in inflation. Incorrect.
(B): Inflation does not mean a general rise in price level. The question lists just one way for the price level to increase. There may be others. Incorrect.
(C): Nowhere does the question stem say that inflation results in excess supply of money. Incorrect.
(D): CORRECT. Inflation is caused by the mismatch between the demand for and supply of money.
(E): Inflation is caused when the price level rises (caused by a mismatch between demand for and supply of money), not the price index. Incorrect.
