Question

Match List-I with List-II
List-I (Terms of inflation):
(A) Open inflation
(B) Ratchet inflation
(C) Cost-push inflation
(D) Stagflation
List-II (Description):
(I) Inflation due to an increase in the cost of inputs used in production.
(II) Inflation in the absence of any barrier or government control to price rise.
(III) Inflation in an economy is accompanied by declining output and rising unemployment.
(IV) Inflation in sector of excessive aggregate demand and deflation in sectors of inadequate demand; keeping the general price level unchanged.
Choose the correct answer from the options given below:

• (A) - (I), (B) - (II), (C) - (III), (D) - (IV)
• (A) - (II), (B) - (IV), (C) - (I), (D) - (III)
• (A) - (I), (B) - (II), (C) - (IV), (D) - (III)
• (A) - (III), (B) - (IV), (C) - (I), (D) - (II)

Hint:

Cost-push inflation is directly tied to the cost of inputs (C matches I), and stagflation involves declining output with high inflation (D matches III). Matching these two instantly points to the correct option.

Answer 1

The Correct Option is B

Step 1: Understanding the Concept:
This question tests understanding of different inflationary terms, each describing a distinct economic cause or market condition.
Detailed Explanation:
Let us analyze and match each term with its description:
- (A) Open inflation: This occurs when the price level rises without any administrative barriers, price controls, or rationing by the government. Hence, it matches with (II).
- (B) Ratchet inflation: This refers to a structural type of inflation where prices rise in high-demand sectors but do not fall in low-demand sectors due to downward price stickiness, causing the average price level to rise. This matches with (IV).
- (C) Cost-push inflation: This is driven by aggregate supply shocks, such as increases in the costs of wages or raw materials. This matches with (I).
- (D) Stagflation: This is a combination of stagnant economic output (and rising unemployment) accompanied by high inflation. This matches with (III).
Combining these matches, we get:
\[ \text{(A) - (II), (B) - (IV), (C) - (I), (D) - (III)} \]

Step 2: Final Answer:
The matched sequence corresponds to Option (B).