Consider the following statements regarding inflation: Statement (A): Head-line inflation refers to the rate of change in the Consumer Price Index Number, a measure of the average price of a standard basket of goods and services consumed by a typical family. Statement (B): Core inflation measures the change in average consumer prices after excluding from the Consumer Price Index certain items of volatile prices such as food and fuel. Of these statements,
- A.Neither (A) nor (B) is correct.
- B.Both (A) and (B) are correct.
- C.Only (B) is correct.
- D.Only (A) is correct.
Correct answer
Explanation
The correct answer is B, Both (A) and (B) are correct. Headline inflation is the change in the overall Consumer Price Index, which tracks the average price of a fixed basket of goods and services bought by a typical household, including food, fuel, clothing, housing and services. Core inflation removes the items whose prices swing the most, mainly food and fuel, to show the underlying trend in prices. The difference matters for policy: a jump in vegetable prices after a poor monsoon may fade in a few months, but a steady rise in core inflation tells the central bank that price pressure has spread across the economy. That is why the RBI's Monetary Policy Committee watches both numbers. In India the all-India CPI is compiled every month by the National Statistics Office. Option A is wrong because both statements are correct definitions. Option C is wrong because statement A is also correct. Option D is wrong because statement B is also correct. Exam tip: headline = the whole basket; core = the basket minus food and fuel.
Practice Questions
View allAccording to the law of diminishing marginal utility, as the amount of a good consumed increases, the marginal utility of that good tends to
- A.improve
- B.diminish
- C.remain constant
- D.first diminish and then improve
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Each extra unit of a good gives a consumer less additional satisfaction than the unit before it, so marginal utility falls as consumption rises.
Read the full explanation →Consider the following statements about impact of tax : 1. A tax is shifted forward to consumers if the demand is inelastic relative to supply. 2. A tax is shifted backward to producers if the supply is relatively more inelastic than demand. Which of the statements given above is/are correct?
- A.1 only
- B.2 only
- C.Both 1 and 2
- D.Neither 1 nor 2
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The burden of a tax falls more heavily on whichever side of the market is less elastic, the side that cannot easily walk away.
Read the full explanation →UBI, as an alternative for subsidies in poverty alleviation, stands for
- A.Union Basic Income
- B.Undefined Basic Income
- C.Unconditional Basic Income
- D.Universal Basic Income
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UBI is the idea of paying every citizen a fixed sum of money regularly, without conditions, in place of a large number of separate subsidies and welfare schemes.
Read the full explanation →Who among the following is the Chairman of the Fourteenth Finance Commission?
- A.C. Rangarajan
- B.Vijay Kelkar
- C.Y. V. Reddy
- D.Rakesh Mohan
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The Fourteenth Finance Commission, set up in 2013 for the award period 2015-2020, was chaired by Y. V. Reddy, a former Governor of the Reserve Bank of India.
Read the full explanation →Why was constitutional amendment needed for introducing GST?
- A.States were not willing to agree with the Union for introduction of GST without amendment in the Constitution.
- B.GST was to be implemented on concurrent base and Article 246 was inadequate for such a case.
- C.The Empowered Committee of Finance Ministers had recommended for constitutional amendment.
- D.The GST Council had recommended for constitutional amendment so that its power enhances.
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GST is levied by the Union and the States together on the same supply, and Article 246, which splits taxing powers between them through separate lists, did not allow such a concurrent tax.
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