Question

Q10) The problems of high inflation is/are

i) It reduces the purchasing power of the people

ii) It increases the savings in a country

iii) Interest rates goes up

iv) Investments increases

Choose the correct answer

• A. a) All the above
• B. b) i and iii only
• C. c) ii and iv only
• D. d) i, iii and iv only

Answer 1

The correct option is B

b) i and iii only

Ans: B
Explanation: Inflation means a persistent and widespread growth in the prices of goods and services. When the prices of goods and services increases it reduces the purchasing power of the people. Due to the increased expenditure people will save less and hence savings decreases.

Due to low savings, the overall deposits in the banks reduces and this puts pressure on available financial resources. This leads to increase in the interest rates.

Due to higher interest rates and low demand investment also reduces.