To combat inflation, what is the usual monetary policy stance adopted?
- A.Owlish
- B.Dovish
- C.Hicksian
- D.Hawkish
Correct answer
Explanation
The correct answer is D, Hawkish. A hawkish stance means the central bank treats inflation as its first enemy and is ready to raise interest rates and tighten money supply, even at some cost to growth. Higher rates make loans dearer, so people and firms borrow and spend less, demand cools and prices stop rising so fast. India saw this when the RBI raised the repo rate from 4 per cent to 6.5 per cent between May 2022 and February 2023 to fight inflation. The opposite, a dovish stance, cuts rates to support growth and jobs, as in 2020 during the Covid slowdown. Option A is wrong because 'owlish' is only an informal label some writers use for a wait-and-watch, neutral position, not the usual anti-inflation stance. Option B is wrong because a dovish stance eases money and fuels inflation rather than fighting it. Option C is wrong because 'Hicksian' refers to the economist John Hicks and his IS-LM model, not to a policy stance. Exam tip: hawk = fight inflation, raise rates; dove = support growth, cut rates.
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
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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
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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
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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
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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.
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