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Consider the following statements.
  1. Core inflation is a measure of the total inflation within an economy, including commodities such as food and energy prices.
  2. Core inflation typically rises and falls more gradually than inflation in food and fuel.
Which of the above statements is/are incorrect?
  • a)
    1 only 
  • b)
    2 only 
  • c)
    Both 1 and 2 
  • d)
    Neither 1 nor 2
Correct answer is option 'A'. Can you explain this answer?
Most Upvoted Answer
Consider the following statements. Core inflation is a measure of the ...
Core inflation is a measure of the total inflation within an economy, including commodities such as food and energy prices. However, this statement is incorrect. Core inflation specifically excludes certain volatile components like food and energy prices. Let's analyze the statements in detail:

1. Core inflation is a measure of the total inflation within an economy, including commodities such as food and energy prices.
This statement is incorrect. Core inflation is actually a measure of inflation that excludes certain volatile components such as food and energy prices. The purpose of excluding these items is to focus on the underlying inflationary trends within an economy, as food and energy prices tend to be more volatile and can be influenced by factors such as weather conditions and geopolitical events. By excluding these items, core inflation provides a more stable and reliable indicator of inflationary pressures.

2. Core inflation typically rises and falls more gradually than inflation in food and fuel.
This statement is correct. As core inflation excludes the more volatile components of food and energy prices, it tends to rise and fall more gradually than inflation in these specific sectors. This is because core inflation is influenced by broader economic factors, such as changes in wages, productivity, and overall demand and supply conditions. On the other hand, inflation in food and fuel can be more influenced by short-term supply shocks or changes in global commodity prices, leading to more abrupt changes in prices.

In summary, the correct answer is option 'A' - only statement 1 is incorrect. Core inflation specifically excludes commodities such as food and energy prices, and it tends to rise and fall more gradually than inflation in these specific sectors.
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Consider the following statements. Core inflation is a measure of the total inflation within an economy, including commodities such as food and energy prices. Core inflation typically rises and falls more gradually than inflation in food and fuel.Which of the above statements is/are incorrect?a)1 onlyb)2 onlyc)Both 1 and 2d)Neither 1 nor 2Correct answer is option 'A'. Can you explain this answer?
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