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Question No. 114Interactive Test Mode
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Q114. Consider the following statements: 1. Inflation benefits the debtors. 2. Inflation benefits the bond-holders. Which of the statements given above is/are correct?

Consider the following statements:

  1. Inflation benefits the debtors.
  2. Inflation benefits the bond-holders.

Which of the statements given above is/are correct?

Select the correct option below (or cross out options to eliminate)

Official Answer Key & Detailed Solution

Ready to check the official UPSC Answer Key?

Click any option above to test yourself under exam conditions, or reveal the explanation directly.

Official UPSC Answer KeyUPSC Prelims 2013 • Indian Economy

Correct Answer: Option (A) — 1 only

Concept & Option Breakdown

Standard Reference Verified

• Statement 1 is correct: Debtors repay their fixed nominal loans with money that has lower purchasing power than when it was borrowed, effectively reducing the real value of their debt. • Statement 2 is incorrect: Bond-holders (creditors) receive fixed interest coupon payments whose real purchasing power is eroded by inflation, leading to a loss in real returns.

Elimination Heuristic & Exam Approach

In times of inflation, borrowers/debtors gain while lenders/creditors/bondholders lose because the real value of future repayments declines.

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Question Specifications & Syllabus Mapping

Examination & YearUPSC Civil Services Preliminary Examination 2013 (Q114)
Paper & Marking SchemeGS Paper I • 2 Marks (-0.66 Negative for incorrect response)
Syllabus Subject & TopicIndian Economy → Banking & Financial System
Official Answer KeyOption (A) — 1 only

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Frequently Asked Questions — UPSC Prelims 2013 Q114

What is the official answer for UPSC Prelims 2013 GS Paper I Question 114 (Indian Economy)?

The official UPSC answer key for this 2013 Indian Economy (Banking & Financial System) question is Option (A): "1 only". Correct attempts carry 2 Marks with -0.66 Negative penalty for wrong answers.

Which UPSC Prelims syllabus topic does this 2013 question belong to?

This question belongs to GS Paper I under the subject "Indian Economy" and micro-topic "Banking & Financial System". You can explore all repeated questions from Banking & Financial System in Acme AI's 3D Prelims PYQ Realm or practice 50 full-length and sectional tests in the APT Prelims Test Series.

How can I solve this Banking & Financial System UPSC Prelims question using option elimination?

In times of inflation, borrowers/debtors gain while lenders/creditors/bondholders lose because the real value of future repayments declines.

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