{"id":85517,"date":"2025-06-01T03:19:31","date_gmt":"2025-06-01T03:19:31","guid":{"rendered":"https:\/\/exam.pscnotes.com\/mcq\/?p=85517"},"modified":"2025-06-01T03:19:31","modified_gmt":"2025-06-01T03:19:31","slug":"which-of-the-following-statements-is-are-correct-a-price-index-capt","status":"publish","type":"post","link":"https:\/\/exam.pscnotes.com\/mcq\/which-of-the-following-statements-is-are-correct-a-price-index-capt\/","title":{"rendered":"Which of the following statements is\/are correct?\n  A price index capt"},"content":{"rendered":"<p>Which of the following statements is\/are correct?<\/p>\n<ul>\n<li>A price index captures the change in the average price of a constant basket of commodities.<\/li>\n<li>If 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.<\/li>\n<\/ul>\n<p>Select the correct answer using the code given below.<\/p>\n<p>[amp_mcq option1=&#8221;1 only&#8221; option2=&#8221;2 only&#8221; option3=&#8221;Both 1 and 2&#8243; option4=&#8221;Neither 1 nor 2&#8243; correct=&#8221;option1&#8243;]<\/p>\n<div class=\"psc-box-pyq-exam-year-detail\">\n<div class=\"pyq-exam\">\n<div class=\"psc-heading\">This question was previously asked in<\/div>\n<div class=\"psc-title line-ellipsis\">UPSC CDS-1 &#8211; 2024<\/div>\n<\/div>\n<div class=\"pyq-exam-psc-buttons\"><a href=\"\/pyq\/pyq-upsc-cds-1-2024.pdf\" target=\"_blank\" class=\"psc-pdf-button\" rel=\"noopener\">Download PDF<\/a><a href=\"\/pyq-upsc-cds-1-2024\" target=\"_blank\" class=\"psc-attempt-button\" rel=\"noopener\">Attempt Online<\/a><\/div>\n<\/div>\n<section id=\"pyq-correct-answer\">\nA) 1 only<br \/>\n<\/section>\n<section id=\"pyq-key-points\">\n&#8211; Statement 1 is correct. A price index (like the Consumer Price Index or CPI) is typically constructed to measure the average change over time in the prices of a constant basket of consumer goods and services. While the GDP deflator uses a changing basket, the statement refers to &#8220;a price index,&#8221; and indices using a constant basket are fundamental examples.<br \/>\n&#8211; Statement 2 is incorrect. The inflation rate in a given year is the percentage change in the price index compared to the *previous* year.<br \/>\n    &#8211; Inflation rate in the 2nd year = [(Index in Year 2 &#8211; Index in Year 1) \/ Index in Year 1] * 100 = [(110 &#8211; 100) \/ 100] * 100 = 10%. This part is correct.<br \/>\n    &#8211; Inflation rate in the 3rd year = [(Index in Year 3 &#8211; Index in Year 2) \/ Index in Year 2] * 100 = [(121 &#8211; 110) \/ 110] * 100 = (11 \/ 110) * 100 = 10%. The statement says 21%, which is incorrect. The 21% represents the cumulative increase from Year 1 to Year 3.<br \/>\n<\/section>\n<section id=\"pyq-additional-information\">\n&#8211; The inflation rate calculation is a year-on-year percentage change. Cumulative percentage changes over multiple years are calculated differently.<br \/>\n<\/section>\n","protected":false},"excerpt":{"rendered":"<p>Which of the following statements is\/are correct? A price index captures the change in the average price of a constant basket of commodities. If 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 &#8230; <\/p>\n<p class=\"read-more-container\"><a title=\"Which of the following statements is\/are correct?\n  A price index capt\" class=\"read-more button\" href=\"https:\/\/exam.pscnotes.com\/mcq\/which-of-the-following-statements-is-are-correct-a-price-index-capt\/#more-85517\">Detailed Solution<span class=\"screen-reader-text\">Which of the following statements is\/are correct?<br \/>\n  A price index capt<\/span><\/a><\/p>\n","protected":false},"author":1,"featured_media":0,"comment_status":"closed","ping_status":"open","sticky":false,"template":"","format":"standard","meta":{"footnotes":""},"categories":[1087],"tags":[1103,1120,1190],"class_list":["post-85517","post","type-post","status-publish","format-standard","hentry","category-upsc-cds-1","tag-1103","tag-economic-development","tag-money-banking","no-featured-image-padding"],"yoast_head":"<!-- This site is optimized with the Yoast SEO Premium plugin v22.2 (Yoast SEO v23.3) - https:\/\/yoast.com\/wordpress\/plugins\/seo\/ -->\n<title>Which of the following statements is\/are correct?  A price index capt<\/title>\n<meta name=\"description\" content=\"A) 1 only - Statement 1 is correct. A price index (like the Consumer Price Index or CPI) is typically constructed to measure the average change over time in the prices of a constant basket of consumer goods and services. While the GDP deflator uses a changing basket, the statement refers to &quot;a price index,&quot; and indices using a constant basket are fundamental examples. - Statement 2 is incorrect. The inflation rate in a given year is the percentage change in the price index compared to the *previous* year. - Inflation rate in the 2nd year = [(Index in Year 2 - Index in Year 1) \/ Index in Year 1] * 100 = [(110 - 100) \/ 100] * 100 = 10%. This part is correct. - Inflation rate in the 3rd year = [(Index in Year 3 - Index in Year 2) \/ Index in Year 2] * 100 = [(121 - 110) \/ 110] * 100 = (11 \/ 110) * 100 = 10%. The statement says 21%, which is incorrect. The 21% represents the cumulative increase from Year 1 to Year 3.\" \/>\n<meta name=\"robots\" content=\"index, follow, max-snippet:-1, max-image-preview:large, max-video-preview:-1\" \/>\n<link rel=\"canonical\" href=\"https:\/\/exam.pscnotes.com\/mcq\/which-of-the-following-statements-is-are-correct-a-price-index-capt\/\" \/>\n<meta property=\"og:locale\" content=\"en_US\" \/>\n<meta property=\"og:type\" content=\"article\" \/>\n<meta property=\"og:title\" content=\"Which of the following statements is\/are correct?  A price index capt\" \/>\n<meta property=\"og:description\" content=\"A) 1 only - Statement 1 is correct. A price index (like the Consumer Price Index or CPI) is typically constructed to measure the average change over time in the prices of a constant basket of consumer goods and services. While the GDP deflator uses a changing basket, the statement refers to &quot;a price index,&quot; and indices using a constant basket are fundamental examples. - Statement 2 is incorrect. The inflation rate in a given year is the percentage change in the price index compared to the *previous* year. - Inflation rate in the 2nd year = [(Index in Year 2 - Index in Year 1) \/ Index in Year 1] * 100 = [(110 - 100) \/ 100] * 100 = 10%. This part is correct. - Inflation rate in the 3rd year = [(Index in Year 3 - Index in Year 2) \/ Index in Year 2] * 100 = [(121 - 110) \/ 110] * 100 = (11 \/ 110) * 100 = 10%. The statement says 21%, which is incorrect. The 21% represents the cumulative increase from Year 1 to Year 3.\" \/>\n<meta property=\"og:url\" content=\"https:\/\/exam.pscnotes.com\/mcq\/which-of-the-following-statements-is-are-correct-a-price-index-capt\/\" \/>\n<meta property=\"og:site_name\" content=\"MCQ and Quiz for Exams\" \/>\n<meta property=\"article:published_time\" content=\"2025-06-01T03:19:31+00:00\" \/>\n<meta name=\"author\" content=\"rawan239\" \/>\n<meta name=\"twitter:card\" content=\"summary_large_image\" \/>\n<meta name=\"twitter:label1\" content=\"Written by\" \/>\n\t<meta name=\"twitter:data1\" content=\"rawan239\" \/>\n\t<meta name=\"twitter:label2\" content=\"Est. reading time\" \/>\n\t<meta name=\"twitter:data2\" content=\"1 minute\" \/>\n<!-- \/ Yoast SEO Premium plugin. -->","yoast_head_json":{"title":"Which of the following statements is\/are correct?  A price index capt","description":"A) 1 only - Statement 1 is correct. A price index (like the Consumer Price Index or CPI) is typically constructed to measure the average change over time in the prices of a constant basket of consumer goods and services. While the GDP deflator uses a changing basket, the statement refers to \"a price index,\" and indices using a constant basket are fundamental examples. - Statement 2 is incorrect. The inflation rate in a given year is the percentage change in the price index compared to the *previous* year. - Inflation rate in the 2nd year = [(Index in Year 2 - Index in Year 1) \/ Index in Year 1] * 100 = [(110 - 100) \/ 100] * 100 = 10%. This part is correct. - Inflation rate in the 3rd year = [(Index in Year 3 - Index in Year 2) \/ Index in Year 2] * 100 = [(121 - 110) \/ 110] * 100 = (11 \/ 110) * 100 = 10%. The statement says 21%, which is incorrect. The 21% represents the cumulative increase from Year 1 to Year 3.","robots":{"index":"index","follow":"follow","max-snippet":"max-snippet:-1","max-image-preview":"max-image-preview:large","max-video-preview":"max-video-preview:-1"},"canonical":"https:\/\/exam.pscnotes.com\/mcq\/which-of-the-following-statements-is-are-correct-a-price-index-capt\/","og_locale":"en_US","og_type":"article","og_title":"Which of the following statements is\/are correct?  A price index capt","og_description":"A) 1 only - Statement 1 is correct. A price index (like the Consumer Price Index or CPI) is typically constructed to measure the average change over time in the prices of a constant basket of consumer goods and services. While the GDP deflator uses a changing basket, the statement refers to \"a price index,\" and indices using a constant basket are fundamental examples. - Statement 2 is incorrect. The inflation rate in a given year is the percentage change in the price index compared to the *previous* year. - Inflation rate in the 2nd year = [(Index in Year 2 - Index in Year 1) \/ Index in Year 1] * 100 = [(110 - 100) \/ 100] * 100 = 10%. This part is correct. - Inflation rate in the 3rd year = [(Index in Year 3 - Index in Year 2) \/ Index in Year 2] * 100 = [(121 - 110) \/ 110] * 100 = (11 \/ 110) * 100 = 10%. The statement says 21%, which is incorrect. The 21% represents the cumulative increase from Year 1 to Year 3.","og_url":"https:\/\/exam.pscnotes.com\/mcq\/which-of-the-following-statements-is-are-correct-a-price-index-capt\/","og_site_name":"MCQ and Quiz for Exams","article_published_time":"2025-06-01T03:19:31+00:00","author":"rawan239","twitter_card":"summary_large_image","twitter_misc":{"Written by":"rawan239","Est. reading time":"1 minute"},"schema":{"@context":"https:\/\/schema.org","@graph":[{"@type":"WebPage","@id":"https:\/\/exam.pscnotes.com\/mcq\/which-of-the-following-statements-is-are-correct-a-price-index-capt\/","url":"https:\/\/exam.pscnotes.com\/mcq\/which-of-the-following-statements-is-are-correct-a-price-index-capt\/","name":"Which of the following statements is\/are correct? A price index capt","isPartOf":{"@id":"https:\/\/exam.pscnotes.com\/mcq\/#website"},"datePublished":"2025-06-01T03:19:31+00:00","dateModified":"2025-06-01T03:19:31+00:00","author":{"@id":"https:\/\/exam.pscnotes.com\/mcq\/#\/schema\/person\/5807dafeb27d2ec82344d6cbd6c3d209"},"description":"A) 1 only - Statement 1 is correct. A price index (like the Consumer Price Index or CPI) is typically constructed to measure the average change over time in the prices of a constant basket of consumer goods and services. While the GDP deflator uses a changing basket, the statement refers to \"a price index,\" and indices using a constant basket are fundamental examples. - Statement 2 is incorrect. The inflation rate in a given year is the percentage change in the price index compared to the *previous* year. - Inflation rate in the 2nd year = [(Index in Year 2 - Index in Year 1) \/ Index in Year 1] * 100 = [(110 - 100) \/ 100] * 100 = 10%. This part is correct. - Inflation rate in the 3rd year = [(Index in Year 3 - Index in Year 2) \/ Index in Year 2] * 100 = [(121 - 110) \/ 110] * 100 = (11 \/ 110) * 100 = 10%. The statement says 21%, which is incorrect. The 21% represents the cumulative increase from Year 1 to Year 3.","breadcrumb":{"@id":"https:\/\/exam.pscnotes.com\/mcq\/which-of-the-following-statements-is-are-correct-a-price-index-capt\/#breadcrumb"},"inLanguage":"en-US","potentialAction":[{"@type":"ReadAction","target":["https:\/\/exam.pscnotes.com\/mcq\/which-of-the-following-statements-is-are-correct-a-price-index-capt\/"]}]},{"@type":"BreadcrumbList","@id":"https:\/\/exam.pscnotes.com\/mcq\/which-of-the-following-statements-is-are-correct-a-price-index-capt\/#breadcrumb","itemListElement":[{"@type":"ListItem","position":1,"name":"Home","item":"https:\/\/exam.pscnotes.com\/mcq\/"},{"@type":"ListItem","position":2,"name":"UPSC CDS-1","item":"https:\/\/exam.pscnotes.com\/mcq\/category\/upsc-cds-1\/"},{"@type":"ListItem","position":3,"name":"Which of the following statements is\/are correct? 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