CPI and Fiscal Policy

Description: This quiz is designed to assess your understanding of the relationship between the Consumer Price Index (CPI) and Fiscal Policy in India.
Number of Questions: 15
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Tags: cpi fiscal policy inflation indian economy
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What is the primary objective of the Consumer Price Index (CPI) in India?

  1. To measure the changes in the prices of a basket of goods and services consumed by households.

  2. To determine the inflation rate.

  3. To set interest rates.

  4. To control the money supply.


Correct Option: A
Explanation:

The CPI is a measure of the average change in prices over time for a basket of goods and services that are typically purchased by households.

Which government agency is responsible for calculating and publishing the CPI in India?

  1. Reserve Bank of India (RBI)

  2. Ministry of Finance

  3. Central Statistical Organization (CSO)

  4. National Statistical Commission (NSC)


Correct Option: C
Explanation:

The CSO, under the Ministry of Statistics and Programme Implementation, is responsible for calculating and publishing the CPI in India.

What is the base year for the CPI in India?

  1. 2004-05

  2. 2011-12

  3. 2017-18

  4. 2022-23


Correct Option:
Explanation:

The base year for the CPI in India is 2012-13.

What is the composition of the CPI basket in India?

  1. Food and beverages, housing, clothing and footwear, transportation and communication, education and recreation.

  2. Agriculture, industry, and services.

  3. Wholesale and retail trade, hotels and restaurants, and transport, storage, and communication.

  4. Mining and quarrying, manufacturing, and electricity, gas, and water supply.


Correct Option: A
Explanation:

The CPI basket in India includes items such as food and beverages, housing, clothing and footwear, transportation and communication, education and recreation.

How is the CPI used in India?

  1. To calculate inflation rate.

  2. To adjust wages and salaries.

  3. To determine the cost of living.

  4. All of the above.


Correct Option: D
Explanation:

The CPI is used in India to calculate inflation rate, adjust wages and salaries, and determine the cost of living.

What is the relationship between CPI and fiscal policy?

  1. Fiscal policy can be used to control inflation.

  2. Fiscal policy can be used to stimulate economic growth.

  3. Fiscal policy can be used to reduce unemployment.

  4. All of the above.


Correct Option: D
Explanation:

Fiscal policy can be used to control inflation, stimulate economic growth, and reduce unemployment.

How can fiscal policy be used to control inflation?

  1. By increasing government spending.

  2. By decreasing government spending.

  3. By increasing taxes.

  4. By decreasing taxes.


Correct Option: B
Explanation:

Fiscal policy can be used to control inflation by decreasing government spending.

How can fiscal policy be used to stimulate economic growth?

  1. By increasing government spending.

  2. By decreasing government spending.

  3. By increasing taxes.

  4. By decreasing taxes.


Correct Option: A
Explanation:

Fiscal policy can be used to stimulate economic growth by increasing government spending.

How can fiscal policy be used to reduce unemployment?

  1. By increasing government spending.

  2. By decreasing government spending.

  3. By increasing taxes.

  4. By decreasing taxes.


Correct Option: A
Explanation:

Fiscal policy can be used to reduce unemployment by increasing government spending.

What are the potential risks of using fiscal policy to control inflation?

  1. Crowding out of private investment.

  2. Increase in government debt.

  3. Reduced economic growth.

  4. All of the above.


Correct Option: D
Explanation:

The potential risks of using fiscal policy to control inflation include crowding out of private investment, increase in government debt, and reduced economic growth.

What are the potential risks of using fiscal policy to stimulate economic growth?

  1. Inflation.

  2. Increase in government debt.

  3. Crowding out of private investment.

  4. All of the above.


Correct Option: D
Explanation:

The potential risks of using fiscal policy to stimulate economic growth include inflation, increase in government debt, and crowding out of private investment.

What are the potential risks of using fiscal policy to reduce unemployment?

  1. Inflation.

  2. Increase in government debt.

  3. Crowding out of private investment.

  4. All of the above.


Correct Option: D
Explanation:

The potential risks of using fiscal policy to reduce unemployment include inflation, increase in government debt, and crowding out of private investment.

What are some of the challenges in using fiscal policy to manage the CPI in India?

  1. Political considerations.

  2. Time lags.

  3. Uncertainties in economic data.

  4. All of the above.


Correct Option: D
Explanation:

The challenges in using fiscal policy to manage the CPI in India include political considerations, time lags, and uncertainties in economic data.

What are some of the recent trends in CPI in India?

  1. A decline in the rate of inflation.

  2. An increase in the rate of inflation.

  3. A stable rate of inflation.

  4. None of the above.


Correct Option: A
Explanation:

The recent trends in CPI in India show a decline in the rate of inflation.

What are some of the policy measures that the government of India has taken to control inflation?

  1. Tightening monetary policy.

  2. Increasing interest rates.

  3. Reducing government spending.

  4. All of the above.


Correct Option: D
Explanation:

The government of India has taken a number of policy measures to control inflation, including tightening monetary policy, increasing interest rates, and reducing government spending.

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