Consider the following statements:
Statement I: The Consumer Price Index (CPI) is used to measure the level of retail inflation in an economy by tracking changes in the prices of a basket of commonly used goods and services.
Statement II: The CPI is calculated by comparing the cost of a fixed basket of goods and services in the current year to its cost in a base year, multiplied by 100.
Statement III: The CPI measures the core inflation in the economy.

Which one of the following is correct in respect of the above statements?
(a) Both Statement II and Statement III are correct and both of them explain Statement I
(b) Both Statement II and Statement III are correct but only one of them explains Statement I
(c) Only one of the Statements II and Statement III is correct and that explain statement I
(d) Neither Statement II nor Statement III is correct

Question

Consider the following statements:
Statement I: The Consumer Price Index (CPI) is used to measure the level of retail inflation in an economy by tracking changes in the prices of a basket of commonly used goods and services.
Statement II: The CPI is calculated by comparing the cost of a fixed basket of goods and services in the current year to its cost in a base year, multiplied by 100.
Statement III: The CPI measures the core inflation in the economy.

Which one of the following is correct in respect of the above statements?
(a) Both Statement II and Statement III are correct and both of them explain Statement I
(b) Both Statement II and Statement III are correct but only one of them explains Statement I
(c) Only one of the Statements II and Statement III is correct and that explain statement I
(d) Neither Statement II nor Statement III is correct

ONLiNE UPSC · Accepted Answer

The CPI measures retail inflation by tracking price changes in a fixed basket of goods and services commonly consumed by households.

Statement II is correct: This is the correct method of calculating CPI:

Thus, Statement II provides the method behind the concept described in Statement I, so it explains Statement I.
Statement III is not correct: The Consumer Price Index (CPI) measures overall retail inflation by tracking the price changes of a basket of goods and services, including volatile components like food and fuel. In contrast, core inflation is derived from CPI after excluding these volatile items to reflect underlying, long-term inflation trends. This distinction helps policymakers assess persistent inflationary pressures more accurately.

Inflation Measurement

Consumer Price Index (CPI)

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M Question 1	⏱ 0
Consider the following statements: Statement I: The Consumer Price Index (CPI) is used to measure the level of retail inflation in an economy by tracking changes in the prices of a basket of commonly used goods and services. Statement II: The CPI is calculated by comparing the cost of a fixed basket of goods and services in the current year to its cost in a base year, multiplied by 100. Statement III: The CPI measures the core inflation in the economy. Which one of the following is correct in respect of the above statements? (a) Both Statement II and Statement III are correct and both of them explain Statement I (b) Both Statement II and Statement III are correct but only one of them explains Statement I (c) Only one of the Statements II and Statement III is correct and that explain statement I (d) Neither Statement II nor Statement III is correct

Inflation Measurement

Consumer Price Index (CPI)

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