2024 · Q27
Which of the following statements is/are correct?
- 1A price index captures the change in the average price of a constant basket of commodities.
- 2If the price index takes values 100, 110 and 121 in three consecutive years respectively, then the inflation rates in the 2nd and 3rd years are 10% and 21% respectively.
Select the correct answer using the code given below.
General KnowledgeIndian Economy
- A1 only
- B2 only
- CBoth 1 and 2
- DNeither 1 nor 2
Explanation
Statement 1 is correct: a price index measures the change in the average price of a fixed (constant) basket of commodities over time. Statement 2 is incorrect: inflation in the second year is (110−100)/100 = 10%, but in the third year it is (121−110)/110 = 10%, not 21% — the 21% figure is the cumulative rise from the first year. Only statement 1 is correct, so the answer is (A).