Multiple choice

Which of the following statements is incorrect?

  1. Inflation is measured by Consumer Price Index (CPI) and Wholesale Price Index (WPI)

  2. Inflation is a sustained rise in prices of goods and services in an economy

  3. Inflation can be controlled through monetary measures.

  4. Inflation is good for fixed income groups, creditors and country's exports and bad for debtors and equity holders
Reveal answer Fill a bubble to check yourself
D Correct answer
Explanation

Option D is indeed the incorrect statement. Inflation HURTS fixed income groups (their income buys less), HURTS creditors (they're repaid in devalued currency), HELPS debtors (they repay with cheaper money), and its effect on exports is complex (currency depreciation may help exports but import costs rise). Option D has the effects backwards.

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