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Q39 (UPPCS/2021) Economy › Money, Banking & Inflation

Given below are two statements one is labelled as Assertion (A) and other as Reason (R) :
Assertion (A) : The government faces a tough time tackling the bottleneck inflation.
Reason (R) : The situation is due to deficiencies existing in the economy such as supply bottleneck and inefficient distribution.
Select the correct answer from the codes given below.
Codes :

Result
Your answer: —  Â·  Correct: A

Explanation

Bottleneck inflation (also known as structural inflation) occurs when the supply of goods falls drastically while demand remains constant. This is typically caused by supply-side constraints rather than excessive monetary demand.

Assertion (A) is true because the government and central bank find it difficult to tackle this type of inflation using traditional monetary policy. While tools like interest rate hikes can curb demand, they do little to fix structural supply issues in the short term. Reason (R) is true as it correctly identifies the root causes: deficiencies such as infrastructure gaps, supply chain disruptions, and inefficient distribution systems. Since these structural deficiencies are exactly what make the inflation difficult to manage, (R) is the correct explanation of (A).

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