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Q113 (CDS-I/2015) Economy › Money, Banking & Inflation › Inflation concepts Answer Verified

Rise in the price of a commodity means

Result
Your answer: —  Â·  Correct: D
Explanation

A rise in the price of a commodity signifies two simultaneous economic phenomena. First, it represents a rise in the value of the commodity itself relative to money, as more currency units are required to obtain the same quantity [2]. Second, it reflects a fall in the value of the currency, specifically its purchasing power [1]. When the general price level rises, the unit value of money diminishes because a single unit of currency can purchase less than it previously could [3]. This inverse relationship means that as prices increase, the 'real' value or strength of the currency effectively declines [3]. While inflation typically refers to a general rise in prices across a basket of goods, the specific rise in a single commodity's price inherently implies that the commodity has become more valuable relative to the currency used for the transaction [4].

Sources

  1. [1] Macroeconomics (NCERT class XII 2025 ed.) > Chapter 3: Money and Banking > 3.1 FUNCTIONS OF MONEY > p. 37
  2. [2] Indian Economy, Vivek Singh (7th ed. 2023-24) > Chapter 2: Money and Banking- Part I > 2.29 Inflation > p. 112
  3. [3] Indian Economy, Nitin Singhania .(ed 2nd 2021-22) > Chapter 4: Inflation > INFLATION > p. 62
  4. [4] Indian Economy, Vivek Singh (7th ed. 2023-24) > Chapter 1: Fundamentals of Macro Economy > 1.18 Inflation Indices > p. 30
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