Q34) In the past few months, the two main inflation indicators — the Wholesale Price Index (WPI) and the Consumer Price Index (CPI) — are moving in widely divergent directions. Consider the following statements:
1) Headline inflation does not include food and fuel prices while Core inflation includes all-item index
2) CPI is measured on base year 2012
3) Reserve Bank of India has now adopted WPI as new measure of Inflation
Which of the above statement(s) is/ are incorrect?
Q34) In the past few months, the two main inflation indicators — the Wholesale Price Index (WPI) and the Consumer Price Index (CPI) — are moving in widely divergent directions. Consider the following statements:
1) Headline inflation does not include food and fuel prices while Core inflation includes all-item index
2) CPI is measured on base year 2012
3) Reserve Bank of India has now adopted WPI as new measure of Inflation
Which of the above statement(s) is/ are incorrect?
The correct option is C Only 1 &3
Ans:34)(c)Expl: The headline inflation is calculated from an all-item index, whereas the core inflation is commonly calculated from a price index that excludes the highly volatile food and fuel components. While WPI is measured on base year 2004-05, CPI is measured on base year 2012 instead of 2010. The government moved to the new base year for CPI from January 2015.
Core inflation is a measure of inflation that excludes certain items that face volatile price movements. Core inflation eliminates products that can have temporary price shocks because these shocks can diverge from the overall trend of inflation and give a false measure of inflation.
The Reserve Bank of India adopted the Consumer Price Index (CPI) as the key measure of Inflation.It was adopted on the basis of recommendations of Urjit R Patel Committee report on Revising and Strengthening the Monetary Policy Framework as it is intended to better gauge inflation expectations because CPI reflects cost of living. Till now the Reserve Bank of India (RBI) was using Wholesale Price Index (WPI) to gauge and measure indicative inflation projections.
Only 1 &3
Ans:34)(c)Expl: The headline inflation is calculated from an all-item index, whereas the core inflation is commonly calculated from a price index that excludes the highly volatile food and fuel components. While WPI is measured on base year 2004-05, CPI is measured on base year 2012 instead of 2010. The government moved to the new base year for CPI from January 2015.
Core inflation is a measure of inflation that excludes certain items that face volatile price movements. Core inflation eliminates products that can have temporary price shocks because these shocks can diverge from the overall trend of inflation and give a false measure of inflation.
The Reserve Bank of India adopted the Consumer Price Index (CPI) as the key measure of Inflation.It was adopted on the basis of recommendations of Urjit R Patel Committee report on Revising and Strengthening the Monetary Policy Framework as it is intended to better gauge inflation expectations because CPI reflects cost of living. Till now the Reserve Bank of India (RBI) was using Wholesale Price Index (WPI) to gauge and measure indicative inflation projections.
