Inflation and Monetary Policy MCQs 2026: Complete RBI Guide for UPSC

Inflation and Monetary Policy MCQs 2026 are extremely important for UPSC Prelims preparation. Topics like RBI, Repo Rate, CPI, WPI, and Monetary Policy Committee are frequently asked in the exam. Practicing these Inflation and Monetary Policy MCQs 2026 will help you build strong conceptual clarity and improve accuracy in the examination.

Practicing Inflation and Monetary Policy MCQs 2026 is one of the most effective ways to strengthen your understanding of RBI policies and inflation concepts.

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🔥 Inflation and Monetary Policy MCQs 2026 (Basics)

1. Inflation refers to:
A. Fall in prices
B. Rise in general price level
C. Rise in GDP
D. Fall in demand
👉 Answer: B

2. Demand-pull inflation occurs when:
A. Supply exceeds demand
B. Demand exceeds supply
C. Costs fall
D. Taxes decrease
👉 Answer: B

3. Cost-push inflation is caused by:
A. Increase in wages/raw materials
B. Increase in demand
C. Export rise
D. Tax cuts
👉 Answer: A

4. Deflation means:
A. Rising prices
B. Falling prices
C. Stable prices
D. High growth
👉 Answer: B

5. Hyperinflation is:
A. Mild inflation
B. Extremely high inflation
C. No inflation
D. Negative inflation
👉 Answer: B

6. Stagflation is:
A. Growth + inflation
B. Inflation + unemployment
C. Deflation
D. Growth only
👉 Answer: B

7. Inflation reduces:
A. Purchasing power
B. Production
C. Employment
D. Trade
👉 Answer: A

8. Moderate inflation is:
A. Good for economy
B. Always bad
C. Irrelevant
D. Harmful always
👉 Answer: A

9. Core inflation excludes:
A. Food & fuel
B. Services
C. Goods
D. Imports
👉 Answer: A

10. Headline inflation includes:
A. All items
B. Only food
C. Only fuel
D. Only services
👉 Answer: A

11. Inflation impacts:
A. Savings
B. Income distribution
C. Investment
D. All
👉 Answer: D

12. Demand-pull inflation is linked to:
A. Excess demand
B. Low demand
C. Stable demand
D. Supply shock
👉 Answer: A

13. Cost-push inflation arises due to:
A. Supply shocks
B. Demand rise
C. Income rise
D. Tax cuts
👉 Answer: A

14. Inflation benefits:
A. Fixed income earners
B. Borrowers
C. Savers
D. Workers
👉 Answer: B

15. Deflation may cause:
A. Growth
B. Recession
C. Stability
D. Employment rise
👉 Answer: B

16. Inflation targeting means:
A. Fixing GDP
B. Controlling inflation
C. Controlling exports
D. Fixing taxes
👉 Answer: B

17. Inflation is measured by:
A. Price index
B. GDP
C. Income
D. Exports
👉 Answer: A

18. CPI reflects:
A. Retail inflation
B. Wholesale inflation
C. Export inflation
D. Import inflation
👉 Answer: A

19. WPI reflects:
A. Retail
B. Wholesale
C. Services
D. Imports
👉 Answer: B

20. Inflation mainly affects:
A. Consumers
B. Producers
C. Government
D. All
👉 Answer: D

These Inflation and Monetary Policy MCQs 2026 will help you understand key concepts like demand-pull and cost-push inflation clearly.

🔥 CPI vs WPI MCQs 2026

21. CPI base year (India):
A. 2004
B. 2011–12
C. 2020
D. 1991
👉 Answer: B

22. WPI base year:
A. 2001
B. 2011–12
C. 2015–16
D. 2020
👉 Answer: B

23. CPI includes:
A. Services
B. Only goods
C. Only fuel
D. Only food
👉 Answer: A

24. WPI excludes:
A. Goods
B. Services
C. Fuel
D. Food
👉 Answer: B

25. CPI used by:
A. RBI
B. WTO
C. IMF
D. UN
👉 Answer: A

26. CPI measures:
A. Consumer price
B. Producer price
C. Export price
D. Import price
👉 Answer: A

27. WPI is published by:
A. RBI
B. Ministry of Commerce
C. IMF
D. UN
👉 Answer: B

28. CPI reflects inflation for:
A. Consumers
B. Producers
C. Exporters
D. Traders
👉 Answer: A

29. WPI reflects inflation for:
A. Retail
B. Wholesale
C. Services
D. Imports
👉 Answer: B

30. CPI includes:
A. Food
B. Fuel
C. Housing
D. All
👉 Answer: D

31. CPI better for:
A. Monetary policy
B. Trade
C. Tourism
D. Agriculture
👉 Answer: A

32. WPI focuses on:
A. Producers
B. Consumers
C. Government
D. Exporters
👉 Answer: A

33. CPI calculated by:
A. NSO
B. RBI
C. WTO
D. IMF
👉 Answer: A

34. WPI reflects:
A. Supply side
B. Demand side
C. Both
D. None
👉 Answer: A

35. CPI inflation is:
A. Retail inflation
B. Wholesale
C. Export
D. Import
👉 Answer: A

36. CPI includes services like:
A. Education
B. Health
C. Transport
D. All
👉 Answer: D

37. WPI includes:
A. Manufactured goods
B. Services
C. Imports
D. Exports
👉 Answer: A

38. CPI weight of food is:
A. High
B. Low
C. Zero
D. Fixed
👉 Answer: A

39. WPI weight of food is:
A. Low
B. High
C. Zero
D. Fixed
👉 Answer: A

40. CPI is more relevant for:
A. Public
B. Traders
C. Exporters
D. Importers
👉 Answer: A

A clear understanding of CPI and WPI is essential, and these Inflation and Monetary Policy MCQs 2026 cover all important aspects for UPSC.

🔥 RBI Monetary Tools MCQs 2026

41. Repo rate is:
A. Borrowing rate of RBI
B. Lending rate of RBI
C. Tax rate
D. Export rate
👉 Answer: B

42. Reverse repo rate is:
A. RBI borrowing from banks
B. RBI lending to banks
C. Tax rate
D. Export rate
👉 Answer: A

43. CRR means:
A. Cash Reserve Ratio
B. Credit Ratio
C. Capital Ratio
D. Cash Rate
👉 Answer: A

44. SLR means:
A. Statutory Liquidity Ratio
B. Savings Loan Ratio
C. Supply Loan Rate
D. None
👉 Answer: A

45. Repo rate increase leads to:
A. Inflation rise
B. Inflation fall
C. No change
D. Growth rise
👉 Answer: B

46. CRR is maintained with:
A. RBI
B. Banks
C. Govt
D. IMF
👉 Answer: A

47. SLR is maintained in:
A. Liquid assets
B. Cash only
C. Gold only
D. Bonds only
👉 Answer: A

48. Monetary policy is controlled by:
A. RBI
B. Govt
C. IMF
D. WTO
👉 Answer: A

49. Repo rate reduces:
A. Inflation
B. GDP
C. Trade
D. Tourism
👉 Answer: A

50. Reverse repo increases:
A. Liquidity
B. Savings
C. Lending
D. Borrowing
👉 Answer: B

51. RBI controls:
A. Money supply
B. Trade
C. Agriculture
D. Tourism
👉 Answer: A

52. Liquidity means:
A. Cash availability
B. Income
C. GDP
D. Exports
👉 Answer: A

53. Monetary tightening means:
A. Increasing rates
B. Decreasing rates
C. Stable rates
D. No change
👉 Answer: A

54. Monetary easing means:
A. Lower rates
B. Higher rates
C. Stable
D. No change
👉 Answer: A

55. RBI regulates:
A. Banks
B. Trade
C. Tourism
D. Agriculture
👉 Answer: A

56. Repo rate affects:
A. Loan rates
B. Exports
C. Imports
D. GDP
👉 Answer: A

57. CRR increase leads to:
A. Less liquidity
B. More liquidity
C. No change
D. Inflation rise
👉 Answer: A

58. SLR increase leads to:
A. Less lending
B. More lending
C. No change
D. Inflation rise
👉 Answer: A

59. RBI is India’s:
A. Central bank
B. Commercial bank
C. Investment bank
D. Private bank
👉 Answer: A

60. Monetary policy aims at:
A. Price stability
B. Growth
C. Stability
D. All
👉 Answer: D

These Inflation and Monetary Policy MCQs 2026 explain important tools like repo rate, CRR, and SLR in a simple way.

Also read 👉 Current Affairs MCQs 2026

Learn more about RBI policies 👉

🔥MPC MCQs 2026

61. Monetary Policy Committee (MPC) was established under which Act?
A. RBI Act, 1934
B. Banking Regulation Act
C. Finance Act
D. Companies Act
👉 Answer: A

62. MPC was constituted in which year?
A. 2014
B. 2015
C. 2016
D. 2017
👉 Answer: C

63. Total members in MPC are:
A. 4
B. 5
C. 6
D. 7
👉 Answer: C

64. Who is the Chairperson of MPC?
A. Finance Minister
B. RBI Governor
C. Prime Minister
D. SEBI Chairman
👉 Answer: B

65. How many members are nominated by the Government in MPC?
A. 2
B. 3
C. 4
D. 5
👉 Answer: B

66. RBI members in MPC are:
A. 2
B. 3
C. 4
D. 5
👉 Answer: B

67. MPC mainly decides:
A. Fiscal policy
B. Monetary policy
C. Trade policy
D. Industrial policy
👉 Answer: B

68. MPC decides the level of:
A. Tax rate
B. Repo rate
C. GDP
D. Exports
👉 Answer: B

69. Inflation target set for RBI is:
A. 2% ±1%
B. 4% ±2%
C. 6% ±1%
D. 5% ±3%
👉 Answer: B

70. MPC meets at least:
A. Monthly
B. Quarterly
C. Bi-monthly
D. Yearly
👉 Answer: C

71. Each MPC member has:
A. No vote
B. One vote
C. Two votes
D. Three votes
👉 Answer: B

72. In case of a tie, the deciding vote is given by:
A. Finance Minister
B. RBI Governor
C. PM
D. SEBI Chief
👉 Answer: B

73. MPC decisions are based on:
A. Majority vote
B. Unanimous vote
C. Government order
D. RBI decision only
👉 Answer: A

74. MPC is responsible for achieving:
A. GDP growth
B. Inflation target
C. Trade surplus
D. Export growth
👉 Answer: B

75. Inflation targeting framework started in:
A. 2014
B. 2015
C. 2016
D. 2017
👉 Answer: C

76. MPC decisions are published in:
A. Budget
B. Monetary policy report
C. Economic survey
D. Census
👉 Answer: B

77. MPC is related to:
A. Fiscal policy
B. Monetary policy
C. Trade policy
D. Industrial policy
👉 Answer: B

78. MPC ensures:
A. Price stability
B. Export growth
C. Industrial growth
D. Trade balance
👉 Answer: A

79. MPC was recommended by:
A. Rangarajan Committee
B. Urjit Patel Committee
C. Narasimham Committee
D. Kelkar Committee
👉 Answer: B

80. MPC replaced:
A. RBI Governor system
B. Single decision system
C. Government control
D. IMF control
👉 Answer: B

Understanding MPC is crucial, and these Inflation and Monetary Policy MCQs 2026 provide complete coverage of its structure and functions.

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🔥 Current Affairs Inflation MCQs 2026

81. RBI increases repo rate primarily to control:
A. Unemployment
B. Inflation
C. Exports
D. Imports
👉 Answer: B

82. When inflation rises sharply, RBI generally:
A. Decreases repo rate
B. Increases repo rate
C. Does nothing
D. Reduces CRR
👉 Answer: B

83. Repo rate hike leads to:
A. Cheaper loans
B. Costlier loans
C. No change
D. More exports
👉 Answer: B

84. Reverse repo rate increase leads to:
A. More liquidity
B. Less liquidity
C. No change
D. Higher exports
👉 Answer: B

85. High inflation reduces:
A. Savings value
B. Exports
C. Imports
D. Production
👉 Answer: A

86. Inflation targeting framework in India focuses on:
A. GDP growth
B. Price stability
C. Trade balance
D. Employment
👉 Answer: B

87. RBI uses monetary policy to maintain:
A. Exchange rate only
B. Price stability
C. Agricultural output
D. Population control
👉 Answer: B

88. Increase in CRR results in:
A. More bank lending
B. Less bank lending
C. No change
D. Higher exports
👉 Answer: B

89. Increase in SLR leads to:
A. More liquidity
B. Reduced liquidity
C. No effect
D. Increase in imports
👉 Answer: B

90. RBI monetary tightening aims to:
A. Boost inflation
B. Reduce inflation
C. Increase exports
D. Increase imports
👉 Answer: B

91. When inflation is low, RBI may:
A. Increase repo rate
B. Decrease repo rate
C. Increase CRR
D. Increase SLR
👉 Answer: B

92. High inflation impacts economy by:
A. Increasing purchasing power
B. Reducing purchasing power
C. Increasing savings
D. Increasing employment
👉 Answer: B

93. Repo rate cut leads to:
A. Expensive loans
B. Cheaper loans
C. Less liquidity
D. Lower investment
👉 Answer: B

94. RBI policy rates influence:
A. Loan interest rates
B. Export policy
C. Import duties
D. Trade agreements
👉 Answer: A

95. Inflation in India is mainly measured by:
A. WPI
B. CPI
C. GDP
D. GNP
👉 Answer: B

96. RBI adjusts policy rates based on:
A. Weather
B. Inflation trends
C. Population
D. Tourism
👉 Answer: B

97. High inflation may lead to:
A. Economic instability
B. Stable economy
C. Growth only
D. No effect
👉 Answer: A

98. Monetary policy affects:
A. Liquidity
B. Credit availability
C. Inflation
D. All of the above
👉 Answer: D

99. RBI’s inflation target band is:
A. 2–4%
B. 4% ±2%
C. 5–7%
D. 3–5%
👉 Answer: B

100. Effective monetary policy helps in:
A. Price stability
B. Economic growth
C. Financial stability
D. All of the above
👉 Answer: D

Detailed explanation 👉 https://www.britannica.com

Conclusion

These Inflation and Monetary Policy MCQs 2026 provide a complete revision package for UPSC aspirants. Covering RBI tools, CPI, WPI, MPC, and current affairs, this set ensures strong preparation. Practice these Inflation and Monetary Policy MCQs 2026 regularly to boost your score in UPSC Prelims.