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    Question

    Consider the following statements with reference to headline inflation:

    I. It is a measure of inflation excluding the commodities which tend to be more volatile.

    II. The headline inflation based on the Consumer Price Index - Combined.

    III. Headline inflation is showing a declining trend from last 10 years

    Which of the statements given above is/are not correct?

    A I only Correct Answer Incorrect Answer
    B II only Correct Answer Incorrect Answer
    C III only Correct Answer Incorrect Answer
    D I and II only Correct Answer Incorrect Answer
    E I and III only Correct Answer Incorrect Answer

    Solution

    Headline inflation is a measure of the total inflation within an economy, including commodities such as food and energy prices (e.g., oil and gas), which tend to be much more volatile and prone to inflationary spikes. Statement 1 is not correct - On the other hand, "core inflation" (also non-food-manufacturing or underlying inflation) is calculated from a consumer price index minus the volatile food and energy components. Hence, Statement 2 is correct - Headline inflation based on the Consumer Price Index – Combined (CPI-C) has been declining continuously for the last five years. Statement 3 is not correct - Headline CPI inflation declined to 3.4 % in 2018-19 from 3.6 % in 2017-18, 4.5 % in 2016-17, 4.9 % in 2015-16 and 5.9 % in 2014-15.

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