n NISM Certifications
XV NISM Series XV
Medium

What is the primary cause of high inflation?

Practice question from NISM XV Mock Test 4 — bank. The correct answer is highlighted below with a full explanation.

Options

  1. A

    Increase in foreign exchange reserves

  2. B

    Higher interest rates

  3. C

    Strengthening of local currency

  4. None of the above

    Correct answer

Why this is the answer

None of the listed options directly cause high inflation: Increasing forex reserves typically strengthens currency and stabilizes the economy. Higher interest rates are used to reduce inflation, not cause it. A stronger currency usually reduces inflation by making imports cheaper.

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