In India, which one of the following is responsible for maintaining price stability by controlling inflation?
- A.Department of Consumer Affairs
- B.Expenditure Management Commission
- C.Financial Stability and Development Council
- D.Reserve Bank of India
Correct answer
Explanation
The correct answer is D, Reserve Bank of India. Controlling inflation through monetary policy is the RBI's legal duty. The RBI Act, 1934 was amended in 2016 to give India a flexible inflation targeting framework. Under it, the central government sets an inflation target in consultation with the RBI, at present 4% CPI inflation with a band of 2% to 6%. A six-member Monetary Policy Committee, chaired by the RBI Governor, fixes the policy repo rate to meet this target, and if inflation stays outside the band for three straight quarters the RBI must explain the failure to the government. Option A is wrong because the Department of Consumer Affairs monitors the prices of essential goods and runs the Price Stabilisation Fund, but it does not control overall inflation. Option B is wrong because the Expenditure Management Commission of 2014 only suggested ways to cut government spending. Option C is wrong because the FSDC, chaired by the Finance Minister, deals with financial stability and coordination among regulators. Exam tip: RBI + Monetary Policy Committee = inflation target of 4% ± 2% CPI.
Practice Questions
View allAccording to the law of diminishing marginal utility, as the amount of a good consumed increases, the marginal utility of that good tends to
- A.improve
- B.diminish
- C.remain constant
- D.first diminish and then improve
Show answer
Each extra unit of a good gives a consumer less additional satisfaction than the unit before it, so marginal utility falls as consumption rises.
Read the full explanation →Consider the following statements about impact of tax : 1. A tax is shifted forward to consumers if the demand is inelastic relative to supply. 2. A tax is shifted backward to producers if the supply is relatively more inelastic than demand. 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
Show answer
The burden of a tax falls more heavily on whichever side of the market is less elastic, the side that cannot easily walk away.
Read the full explanation →UBI, as an alternative for subsidies in poverty alleviation, stands for
- A.Union Basic Income
- B.Undefined Basic Income
- C.Unconditional Basic Income
- D.Universal Basic Income
Show answer
UBI is the idea of paying every citizen a fixed sum of money regularly, without conditions, in place of a large number of separate subsidies and welfare schemes.
Read the full explanation →Who among the following is the Chairman of the Fourteenth Finance Commission?
- A.C. Rangarajan
- B.Vijay Kelkar
- C.Y. V. Reddy
- D.Rakesh Mohan
Show answer
The Fourteenth Finance Commission, set up in 2013 for the award period 2015-2020, was chaired by Y. V. Reddy, a former Governor of the Reserve Bank of India.
Read the full explanation →Why was constitutional amendment needed for introducing GST?
- A.States were not willing to agree with the Union for introduction of GST without amendment in the Constitution.
- B.GST was to be implemented on concurrent base and Article 246 was inadequate for such a case.
- C.The Empowered Committee of Finance Ministers had recommended for constitutional amendment.
- D.The GST Council had recommended for constitutional amendment so that its power enhances.
Show answer
GST is levied by the Union and the States together on the same supply, and Article 246, which splits taxing powers between them through separate lists, did not allow such a concurrent tax.
Read the full explanation →