Multiple Choice Questions on Consider the following statements and identify the right ones I Government can reduce........... for UPSC Civil Services Examination (General Studies) Preparation

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Multiple Choice Questions

Consider the following statements and identify the right ones I Government can reduce...........

Economic Affairs Inflation
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    Consider the following statements and identify the right ones.

    I    Government can reduce indirect taxes to control inflation

    II    There is trade-off between growth and inflation in India

    Codes:

    Only 1

    Incorrect Answer

    Only 2

    Correct Answer

    Both of these

    Incorrect Answer

    None of these

    Incorrect Answer
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    Explanation:
    1st option is incorrect. 
    Reducing income tax will increase disposable income of consumers. Therefore consumer spending and AD will increase. This could cause inflation, if the economy is already quite close to full capacity. If economic growth is already low, a cut in income tax is unlikely to cause inflation.

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    Sahil rana

    Statement 2- Economic Growth and Inflation are couple with each other.

    0 0 reply

    Sarthak Hans

    Economic growth and inflation go hand in hand only upto a certain level. That's why RBI has to mantain the inflation within a range of 2-6% otherwise it's not good for the economy

     0 0 reply
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