UPSC Prelims 2011 Q87: Indian Economy – Inflation & Price Indices
Economic growth is usually coupled with
- (a) Deflation
- (b) Inflation
- (c) Stagflation
- (d) Hyperinflation
Answer: (b) Inflation
Explanation
What economic growth is usually coupled with
As an economy grows, demand for goods, services, and resources typically rises faster than supply can adjust immediately.
| Option | Verdict | Reason |
|---|---|---|
| (a) Deflation | Incorrect | Deflation (falling prices) is typically linked to economic slowdown/contraction, not growth |
| (b) Inflation | Correct | As an economy expands, rising demand, wages, and resource use commonly push prices upward, i.e., a degree of inflation |
| (c) Stagflation | Incorrect | Stagflation (high inflation + stagnant growth) is a pathological combination, not the normal pairing with healthy growth |
| (d) Hyperinflation | Incorrect | Hyperinflation is an extreme, crisis-level phenomenon, not the typical companion of ordinary economic growth |
Growth and prices:
| Point | Detail |
|---|---|
| Normal pairing | Growth + mild/moderate inflation |
| Abnormal pairing | Stagflation (growth stalls, inflation stays high) |
| Extreme case | Hyperinflation (price spiral, unrelated to healthy growth) |
Answer: (b) Inflation.
Why each option is right or wrong
- (a) Incorrect. Deflation is linked to economic contraction, the opposite of growth.
- (b) CORRECT. Economic growth typically comes with some degree of inflation, as demand and resource use rise.
- (c) Incorrect. Stagflation pairs high inflation with stagnant (not growing) output — it's an abnormal combination.
- (d) Incorrect. Hyperinflation is an extreme crisis phenomenon, not a normal growth companion.
Key point
Economic growth is typically coupled with a degree of INFLATION, not deflation, stagflation, or hyperinflation — those represent abnormal or crisis conditions.
Remember
Economic growth is usually coupled with INFLATION (not deflation, stagflation, or hyperinflation).
Common mistakes
- Confusing stagflation (stagnant growth + high inflation) with the normal growth-inflation pairing.
- Assuming growth and deflation can coexist normally, when deflation usually signals contraction.
- Treating hyperinflation as just a stronger version of ordinary growth-linked inflation.
Exam tip
Growth usually = mild inflation. Stagflation and hyperinflation are abnormal/crisis-linked, not standard growth companions.
Sources
- Ministry of Finance, Government of India — Economic Survey 2010–11 (Prices and Monetary Management)
- NCERT Class XII Economics — Introductory Macroeconomics — Determination of Income and Employment