UPSC Prelims Practice Questions — Global central banks’ inflation mood puzzle: more judgment than science

Question 1

The Inflation Expectations Survey of Households (IESH), whose results feed into monetary policy formulation, is conducted exclusively by which one of the following institutions?

Accepted Answer

Reserve Bank of India

Answer

National Statistical Office under the Ministry of Statistics and Programme Implementation

Answer

Labour Bureau under the Ministry of Labour and Employment

Answer

NITI Aayog

Question 2

Of the six members of the Monetary Policy Committee, how many are external members appointed by the Central Government (as distinct from ex-officio RBI members)?

Accepted Answer

Three

Answer

Two

Answer

Four

Answer

Six

Question 3

The World Economic Outlook (WEO), which projected global headline inflation at about 4.4% for 2026, is published by which one of the following organisations?

Accepted Answer

International Monetary Fund

Answer

World Bank

Answer

Organisation for Economic Co-operation and Development

Answer

World Trade Organization

Question 4

According to the IMF's April 2026 guidance, a central bank's decision to 'look through' a negative supply shock (rather than tighten) is contingent primarily upon which one of the following conditions?

Accepted Answer

Inflation expectations remaining well anchored, with the policy stance already properly calibrated

Answer

The fiscal deficit being kept below a statutory ceiling

Answer

The nominal exchange rate remaining fixed against the US dollar

Answer

The magnitude of the supply shock being unusually large

Question 5

In the context of monetary policy, 'looking through' a supply shock most precisely means that the central bank:

Accepted Answer

Refrains from adjusting its policy rate in response to a temporary price shock, expecting the effect to fade without de-anchoring expectations

Answer

Immediately raises the policy rate to offset the entire rise in headline inflation

Answer

Switches its inflation target from headline to core inflation permanently

Answer

Directly intervenes in energy markets to cap the price of the affected commodity

Question 6

According to the IMF, which one of the following is regarded as the single most critical forward-looking input for central banks' interest-rate decisions?

Accepted Answer

Inflation expectations of households and firms

Answer

The current headline unemployment rate

Answer

Past-year real GDP growth

Answer

The level of foreign exchange reserves

UPSC Prelims Practice Questions — Global central banks’ inflation mood puzzle: more judgment than science

Q1. The Inflation Expectations Survey of Households (IESH), whose results feed into monetary policy formulation, is conducted exclusively by which one of the following institutions?

Q2. Of the six members of the Monetary Policy Committee, how many are external members appointed by the Central Government (as distinct from ex-officio RBI members)?

Q3. The World Economic Outlook (WEO), which projected global headline inflation at about 4.4% for 2026, is published by which one of the following organisations?

Q4. According to the IMF's April 2026 guidance, a central bank's decision to 'look through' a negative supply shock (rather than tighten) is contingent primarily upon which one of the following conditions?

Q5. In the context of monetary policy, 'looking through' a supply shock most precisely means that the central bank:

Q6. According to the IMF, which one of the following is regarded as the single most critical forward-looking input for central banks' interest-rate decisions?