Inflation – WPI, CPI, food basket, types & stages of inflation Quiz - ICSE Class 10 Economics

Free practice quiz: Inflation – WPI, CPI, food basket, types & stages of inflation (ICSE Class 10 Economics). 47 multiple-choice questions with answers and explanations. Play online, no sign-up needed.

Sample questions

1. Which index measures changes in the wholesale prices of goods in India, excluding services?

   1. Consumer Price Index (CPI)
   2. Wholesale Price Index (WPI)
   3. Index of Industrial Production (IIP)
   4. Producer Price Index (PPI)
   Show answer

   Answer: B. Wholesale Price Index (WPI)

   The Wholesale Price Index (WPI) in India tracks the changes in prices of commodities at the wholesale level, and it specifically excludes services.

2. The 'food basket' used for CPI calculations aims to represent:

   1. The cost of a fixed basket of goods and services purchased by consumers over time.
   2. The wholesale price of agricultural produce.
   3. The export prices of essential food commodities.
   4. The cost of production for food manufacturers.
   Show answer

   Answer: A. The cost of a fixed basket of goods and services purchased by consumers over time.

   The CPI measures changes in the price of a 'basket' of goods and services that is representative of typical consumer spending. The composition of this basket is updated periodically to reflect changing consumption patterns.

3. The inclusion of services in the CPI, but not in the WPI, contributes to:

   1. A lower measured inflation rate in CPI than WPI.
   2. A higher measured inflation rate in CPI than WPI, if service costs are rising faster.
   3. No difference in the measured inflation rate between CPI and WPI.
   4. An inverse relationship between CPI and WPI.
   Show answer

   Answer: B. A higher measured inflation rate in CPI than WPI, if service costs are rising faster.

   Since the CPI includes services and WPI does not, if the prices of services are increasing at a faster rate than the prices of goods (which are captured by WPI), the CPI will show a higher inflation rate. This is a common scenario in many economies.

4. Which of the following is a key component of the WPI basket in India?

   1. Rent paid by consumers
   2. Cinema tickets
   3. Vegetables and fruits at wholesale markets
   4. Private car maintenance
   Show answer

   Answer: C. Vegetables and fruits at wholesale markets

   The WPI includes primary articles, which encompasses agricultural commodities like vegetables and fruits, priced at the wholesale level.

5. What is the primary difference between deflation and disinflation?

   1. Deflation is a decrease in the rate of inflation, while disinflation is a decrease in the general price level.
   2. Deflation is a decrease in the general price level, while disinflation is a decrease in the rate of inflation.
   3. Deflation only affects goods, while disinflation affects services.
   4. There is no significant difference; the terms are interchangeable.
   Show answer

   Answer: B. Deflation is a decrease in the general price level, while disinflation is a decrease in the rate of inflation.

   Deflation means the overall price level is falling (negative inflation). Disinflation means that while prices are still rising, the rate at which they are rising is slowing down.

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