15 questionswith explanationsfor RAS, Patwari, VDO and other Rajasthan exams
Classified by its cause, inflation resulting from a rise in production costs such as wages and crude oil prices is called:
Answer: (1) Cost-push inflation
Explanation
Cost-push inflation arises from higher input costs; demand-pull arises from excess aggregate demand; creeping and galloping describe its speed.
A situation in which the rate of inflation declines but the general price level continues to rise is called:
Answer: (3) Disinflation
Explanation
Disinflation is a slowdown in the rate of inflation; deflation is an actual fall in the general price level.
'Core inflation', as commonly measured in India, excludes the prices of:
Answer: (2) Food and fuel
Explanation
Core inflation strips out volatile food and fuel prices to show the underlying trend; headline inflation includes them.
The revised All-India Consumer Price Index (CPI) series released by the National Statistics Office (NSO) in February 2026 has which base year?
Answer: (4) 2024
Explanation
On 12 February 2026, NSO (MoSPI) launched the new CPI series with base year 2024 = 100, replacing the 2012 series.
Consider the following statements about the new Wholesale Price Index (WPI) series launched in June 2026: 1. It is compiled by the National Statistics Office (NSO), MoSPI. 2. Its base year is 2022-23. Which of the statements given above is/are correct?
Answer: (2) 2 only
Explanation
WPI is compiled by the Office of the Economic Adviser, DPIIT (Ministry of Commerce and Industry); the new series launched on 15 June 2026 has base year 2022-23.
In Irving Fisher's quantity theory of money, the equation of exchange is written as (M = money supply, V = velocity of money, P = price level, T = volume of transactions):
Answer: (1) MV = PT
Explanation
Fisher's equation of exchange is MV = PT; with V and T constant, the price level changes in proportion to the money supply.
Since April 2022, which rate forms the floor of the Reserve Bank of India's Liquidity Adjustment Facility (LAF) corridor?
Answer: (3) Standing Deposit Facility (SDF) rate
Explanation
The SDF, introduced in April 2022, lets RBI absorb liquidity without collateral and replaced the fixed-rate reverse repo as the floor of the LAF corridor.
As of October 2026, under the RBI's Liquidity Adjustment Facility (LAF) corridor, the Marginal Standing Facility (MSF) rate is set at:
Answer: (2) 25 basis points above the repo rate
Explanation
The LAF corridor is symmetric (50 bps wide): MSF (ceiling) is 25 bps above the repo rate and SDF (floor) is 25 bps below it.
Consider the following statements: 1. Banks earn no interest from RBI on the balances they keep to meet the Cash Reserve Ratio (CRR). 2. Under the Statutory Liquidity Ratio (SLR), banks may hold assets such as cash, gold and unencumbered approved government securities. Which of the statements given above is/are correct?
Answer: (3) Both 1 and 2
Explanation
CRR balances are kept with RBI and earn no interest; SLR is maintained by banks themselves in liquid assets like cash, gold and approved securities.
When the RBI buys government securities through Open Market Operations (OMOs), the effect is to:
Answer: (4) Increase liquidity in the banking system
Explanation
An OMO purchase pays money to sellers of securities, injecting liquidity; an OMO sale absorbs liquidity.
Which of the following is a qualitative (selective) tool of monetary control used by the RBI?
Answer: (1) Moral suasion
Explanation
Moral suasion (persuading banks) is a qualitative tool; CRR, SLR and OMOs are quantitative tools that affect the overall volume of credit.
Under the RBI Act, 1934 (as amended in 2016), the Reserve Bank must hold meetings of the Monetary Policy Committee at least how many times a year?
Answer: (4) Four
Explanation
Section 45ZI of the RBI Act requires at least four MPC meetings a year; in practice the MPC usually meets six times a year.
The statutory basis for the flexible inflation targeting framework and the Monetary Policy Committee was provided by amending the RBI Act, 1934 through the:
Answer: (3) Finance Act, 2016
Explanation
The Finance Act, 2016 amended the RBI Act, 1934 to give statutory backing to inflation targeting and the MPC.
A situation in which monetary policy becomes ineffective because, at a very low rate of interest, people prefer to hold any additional money rather than bonds is called:
Answer: (2) Liquidity trap
Explanation
In Keynes' liquidity trap, demand for money becomes perfectly elastic at a very low interest rate, so increases in money supply fail to lower interest rates further.
Under India's inflation targeting framework, the RBI is deemed to have failed to meet the target if average CPI inflation stays above the upper tolerance level (or below the lower level) for:
Answer: (4) Any three consecutive quarters
Explanation
Failure is defined as average inflation outside the 2-6% band for three consecutive quarters; RBI must then report reasons and remedial steps to the Centre.