UPSC Prelims Practice Questions — AI-driven inflation is 2026’s most overlooked risk, investors say

Q1. With reference to the 'Magnificent Seven' group of U.S. technology firms frequently cited in 2025–26 commentary on AI-driven inflation, consider the following companies: Which of the above is/are NOT correctly identified as a member of the 'Magnificent Seven'?

  1. 1. Nvidia
  2. 2. Tesla
  3. 3. Oracle
  4. 4. Meta Platforms
  • A. 1 and 3
  • B. 3 only
  • C. 3 and 4
  • D. 2 and 3

Q2. With reference to AI-driven inflation risks flagged by international institutions in 2025–26, consider the following statements: Which of the statements given above is/are correct?

  1. 1. The IMF Working Paper 'Power Hungry: How AI Will Drive Energy Demand' (April 2025) estimates that AI data-centre demand could push gas prices up by about 9% in Asia and Europe by 2026.
  2. 2. The OECD Interim Economic Outlook (March 2026) projects global GDP growth at 2.9% in 2026.
  3. 3. The IMF April 2026 World Economic Outlook warns that a moderate correction in AI stock valuations combined with tighter financial conditions could reduce global output by 0.4% in 2026.
  4. 4. The IMF April 2026 WEO concludes that all critical AI firms are publicly listed, eliminating opaque debt-market risks from the AI buildout.
  • A. 1 and 2 only
  • B. 2 and 3 only
  • C. 1, 2 and 3 only
  • D. 1, 2, 3 and 4

Q3. In the context of central-bank discussions on AI-driven inflation, the term 'equilibrium interest rate (r*)' refers to which one of the following?

  • A. The neutral real policy rate at which monetary policy neither stimulates nor restrains aggregate demand
  • B. The statutory minimum lending rate that commercial banks may charge prime borrowers
  • C. The weighted-average overnight rate at which banks lend reserves to one another
  • D. The prevailing long-term yield on inflation-indexed sovereign bonds

Q4. The working paper 'Power Hungry: How AI Will Drive Energy Demand' (April 2025), which underpins much of the 2026 discussion on AI-driven inflation through data-centre electricity demand, was published by which one of the following institutions?

  • A. Organisation for Economic Co-operation and Development (OECD)
  • B. International Monetary Fund (IMF)
  • C. World Bank
  • D. Bank for International Settlements (BIS)

Q5. According to the OECD Economic Outlook, Interim Report (March 2026), what is the projected rate of global GDP growth for the year 2026?

  • A. 2.5%
  • B. 2.7%
  • C. 2.9%
  • D. 3.2%