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Consider the following statements regarding Consumer Price Index (CPI):
1. It captures the average movement of wholesale prices of goods and is primarily used as a GDP deflator.
2. It is calculated for a fixed list of items including food, housing, apparel, transportation, electronics, medical care, education, etc.
Which of the statements given above is/are correct?
1. It captures the average movement of wholesale prices of goods and is primarily used as a GDP deflator.
2. It is calculated for a fixed list of items including food, housing, apparel, transportation, electronics, medical care, education, etc.
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
Correct answer is option 'B'. Can you explain this answer?
Verified Answer
Consider the following statements regarding Consumer Price Index (CPI)...
WPI and CPI inflation rates
- Consumer Price Index (CPI):
- It is an index measuring retail inflation in the economy by collecting the change in prices of most common goods and services used by consumers.
- CPI is also called a market basket, it is calculated for a fixed list of items including food, housing, apparel, transportation, electronics, medical care, education, etc. Hence statement 2 is correct.
- The base Year for CPI is 2012.
- The Wholesale Price Index(WPI):
- The new series of Wholesale Price Index(WPI) with base 2011-12 is effective from April 2017.
- WPI captures the average movement of wholesale prices of goods and is primarily used as a GDP deflator. Hence statement 1 is incorrect.
- WPI(2011-12) reckons only basic prices and does not include taxes, rebate/trade discounts, transport and other charges.
- WPI-based inflation data is put together by the Department for Promotion of Industry and Internal Trade (or DPIIT)
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Most Upvoted Answer
Consider the following statements regarding Consumer Price Index (CPI)...
Statement 1: It captures the average movement of wholesale prices of goods and is primarily used as a GDP deflator.
The first statement is incorrect. The Consumer Price Index (CPI) does not capture the average movement of wholesale prices of goods. Instead, it measures the average price level of a basket of goods and services commonly consumed by households. The CPI is designed to reflect the changes in prices that consumers pay for these goods and services over time. It includes items such as food, housing, apparel, transportation, electronics, medical care, education, etc.
The GDP deflator, on the other hand, is a measure of the average price level of all final goods and services produced within an economy. It is used to convert nominal GDP into real GDP, which adjusts for changes in prices over time. Unlike the CPI, the GDP deflator takes into account both goods produced for consumption and goods produced for investment or exports.
Statement 2: It is calculated for a fixed list of items including food, housing, apparel, transportation, electronics, medical care, education, etc.
The second statement is correct. The Consumer Price Index is calculated for a fixed list of items known as the "basket of goods and services." This basket represents the typical consumption patterns of households and includes a wide range of goods and services such as food, housing, apparel, transportation, electronics, medical care, education, etc. The specific items included in the basket may vary over time to reflect changes in consumption patterns.
The CPI is calculated by collecting price data for each item in the basket and assigning weights to reflect the relative importance of each item in the average household's consumption. These weights are based on expenditure data from surveys conducted among households. The prices are then combined using a formula to calculate the overall index.
In conclusion, statement 1 is incorrect as the CPI does not capture wholesale prices and is not primarily used as a GDP deflator. Statement 2 is correct as the CPI is calculated for a fixed list of items that represent the typical consumption patterns of households. Therefore, the correct answer is option 'B' - 2 only.
The first statement is incorrect. The Consumer Price Index (CPI) does not capture the average movement of wholesale prices of goods. Instead, it measures the average price level of a basket of goods and services commonly consumed by households. The CPI is designed to reflect the changes in prices that consumers pay for these goods and services over time. It includes items such as food, housing, apparel, transportation, electronics, medical care, education, etc.
The GDP deflator, on the other hand, is a measure of the average price level of all final goods and services produced within an economy. It is used to convert nominal GDP into real GDP, which adjusts for changes in prices over time. Unlike the CPI, the GDP deflator takes into account both goods produced for consumption and goods produced for investment or exports.
Statement 2: It is calculated for a fixed list of items including food, housing, apparel, transportation, electronics, medical care, education, etc.
The second statement is correct. The Consumer Price Index is calculated for a fixed list of items known as the "basket of goods and services." This basket represents the typical consumption patterns of households and includes a wide range of goods and services such as food, housing, apparel, transportation, electronics, medical care, education, etc. The specific items included in the basket may vary over time to reflect changes in consumption patterns.
The CPI is calculated by collecting price data for each item in the basket and assigning weights to reflect the relative importance of each item in the average household's consumption. These weights are based on expenditure data from surveys conducted among households. The prices are then combined using a formula to calculate the overall index.
In conclusion, statement 1 is incorrect as the CPI does not capture wholesale prices and is not primarily used as a GDP deflator. Statement 2 is correct as the CPI is calculated for a fixed list of items that represent the typical consumption patterns of households. Therefore, the correct answer is option 'B' - 2 only.
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Consider the following statements regarding Consumer Price Index (CPI):1. It captures the average movement of wholesale prices of goods and is primarily used as aGDP deflator.2. It is calculated for a fixed list of items including food, housing, apparel, transportation,electronics, medical care, education, etc.Which of the statements given above is/are correct?a)1 onlyb)2 onlyc)Both 1 and 2d)Neither 1 nor 2Correct answer is option 'B'. Can you explain this answer?
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Consider the following statements regarding Consumer Price Index (CPI):1. It captures the average movement of wholesale prices of goods and is primarily used as aGDP deflator.2. It is calculated for a fixed list of items including food, housing, apparel, transportation,electronics, medical care, education, etc.Which of the statements given above is/are correct?a)1 onlyb)2 onlyc)Both 1 and 2d)Neither 1 nor 2Correct answer is option 'B'. Can you explain this answer? for UPSC 2025 is part of UPSC preparation. The Question and answers have been prepared according to the UPSC exam syllabus. Information about Consider the following statements regarding Consumer Price Index (CPI):1. It captures the average movement of wholesale prices of goods and is primarily used as aGDP deflator.2. It is calculated for a fixed list of items including food, housing, apparel, transportation,electronics, medical care, education, etc.Which of the statements given above is/are correct?a)1 onlyb)2 onlyc)Both 1 and 2d)Neither 1 nor 2Correct answer is option 'B'. Can you explain this answer? covers all topics & solutions for UPSC 2025 Exam. Find important definitions, questions, meanings, examples, exercises and tests below for Consider the following statements regarding Consumer Price Index (CPI):1. It captures the average movement of wholesale prices of goods and is primarily used as aGDP deflator.2. It is calculated for a fixed list of items including food, housing, apparel, transportation,electronics, medical care, education, etc.Which of the statements given above is/are correct?a)1 onlyb)2 onlyc)Both 1 and 2d)Neither 1 nor 2Correct answer is option 'B'. Can you explain this answer?.
Consider the following statements regarding Consumer Price Index (CPI):1. It captures the average movement of wholesale prices of goods and is primarily used as aGDP deflator.2. It is calculated for a fixed list of items including food, housing, apparel, transportation,electronics, medical care, education, etc.Which of the statements given above is/are correct?a)1 onlyb)2 onlyc)Both 1 and 2d)Neither 1 nor 2Correct answer is option 'B'. Can you explain this answer? for UPSC 2025 is part of UPSC preparation. The Question and answers have been prepared according to the UPSC exam syllabus. Information about Consider the following statements regarding Consumer Price Index (CPI):1. It captures the average movement of wholesale prices of goods and is primarily used as aGDP deflator.2. It is calculated for a fixed list of items including food, housing, apparel, transportation,electronics, medical care, education, etc.Which of the statements given above is/are correct?a)1 onlyb)2 onlyc)Both 1 and 2d)Neither 1 nor 2Correct answer is option 'B'. Can you explain this answer? covers all topics & solutions for UPSC 2025 Exam. Find important definitions, questions, meanings, examples, exercises and tests below for Consider the following statements regarding Consumer Price Index (CPI):1. It captures the average movement of wholesale prices of goods and is primarily used as aGDP deflator.2. It is calculated for a fixed list of items including food, housing, apparel, transportation,electronics, medical care, education, etc.Which of the statements given above is/are correct?a)1 onlyb)2 onlyc)Both 1 and 2d)Neither 1 nor 2Correct answer is option 'B'. Can you explain this answer?.
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