Discussion
In one of the Seminar’s the Governor of RBI said that the schemes like ‘Mahatma Gandhi National Rural Employment Guarantee Scheme’ (MNREGA) have played role in increasing inflation. How MNREGA could have stirred up inflationary pressure? 1. By Increasing demand 2. By increasing rural wage 3. By increasing production
Select the above correct statements
Answer: D
Correct answer: 1 and 2
The first two describe inflationary channels. A guaranteed employment scheme puts purchasing power into rural households, raising demand for food and other goods faster than supply can respond. It also raises rural wages, both directly and by setting a floor that private employers must match - and higher wages feed into the cost of agricultural output.
The third works the other way. Increased production adds to supply and would ease prices, not raise them. So it cannot be part of an explanation of inflationary pressure, whatever its other merits, and only the first two statements answer the question asked.
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