Money & Banking

Which one of the following indices is now used by the Reserve Bank of India to measure the rate of Inflation in India?

[amp_mcq option1=”NASDAQ Index” option2=”BSE Index” option3=”Consumer Price Index” option4=”Wholesale Price Index” correct=”option3″]

The Reserve Bank of India (RBI) now uses the Consumer Price Index (CPI) to measure the rate of inflation in India for monetary policy purposes. Specifically, the CPI Combined (CPI-C) is the key measure.

Historically, the Wholesale Price Index (WPI) was the primary measure of inflation in India. However, WPI captures price changes at the wholesale level and does not reflect the prices paid by consumers. Following recommendations by committees and a shift in focus towards consumer inflation globally, the RBI officially adopted CPI-Combined as its main inflation target measure around 2014-2015.

NASDAQ and BSE Index (Sensex) are stock market indices, which measure the performance of stock markets, not inflation. CPI measures the average change over time in the prices paid by urban consumers for a market basket of consumer goods and services. WPI measures the average change in the price of commodities at the wholesale level.

Which one of the following terms is used in Economics to denote a technique for avoiding a risk by making a counteracting transaction ?

[amp_mcq option1=”Dumping” option2=”Hedging” option3=”Discounting” option4=”Deflating” correct=”option2″]

The correct answer is Hedging.

Hedging is an investment strategy used to offset potential losses or gains that may be incurred by a companion investment. It involves taking an opposite position in a related asset or derivative. The term describes a technique for avoiding a risk (like price fluctuations) by making a counteracting transaction to protect against that risk. Dumping refers to selling goods at an unfairly low price. Discounting relates to calculating present value or deducting interest. Deflating is a reduction in the general price level.

Hedging is commonly used in financial markets, such as currency hedging, interest rate hedging, or commodity hedging, using instruments like futures, options, or forward contracts. It aims to reduce volatility rather than eliminate risk entirely, and it often involves a cost.