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CPI and Poverty

Description: This quiz covers the concepts related to the Consumer Price Index (CPI) and its impact on poverty.
Number of Questions: 15
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Tags: cpi inflation poverty indian economics
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What is the primary purpose of the Consumer Price Index (CPI)?

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

  2. To determine the interest rates set by the central bank.

  3. To calculate the GDP of a country.

  4. To assess the performance of the stock market.

Show answer
Correct Option: A
Explanation:

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

Which of the following is NOT a component of the CPI basket?

  1. Food and beverages

  2. Housing

  3. Transportation

  4. Investments

Show answer
Correct Option: D
Explanation:

Investments are not included in the CPI basket as they are not considered to be a regular household expense.

How is the CPI calculated?

  1. By surveying a representative sample of households about their spending habits.

  2. By tracking the prices of a fixed basket of goods and services over time.

  3. By combining the data from both surveys and price tracking.

  4. By using a complex mathematical model to estimate price changes.

Show answer
Correct Option: B
Explanation:

The CPI is calculated by tracking the prices of a fixed basket of goods and services over time. The basket is updated periodically to reflect changes in consumer spending patterns.

What is the relationship between CPI and inflation?

  1. CPI and inflation are the same.

  2. CPI measures inflation.

  3. Inflation measures CPI.

  4. CPI and inflation are unrelated.

Show answer
Correct Option: B
Explanation:

CPI measures the rate of change in prices over time, which is commonly referred to as inflation.

How does CPI affect poverty levels?

  1. CPI has no impact on poverty levels.

  2. CPI increases poverty levels.

  3. CPI decreases poverty levels.

  4. The relationship between CPI and poverty levels is complex and depends on various factors.

Show answer
Correct Option: D
Explanation:

The relationship between CPI and poverty levels is complex and depends on factors such as the composition of the CPI basket, the distribution of income, and government policies.

Which population group is typically more vulnerable to the effects of CPI increases?

  1. High-income households

  2. Low-income households

  3. Middle-income households

  4. All population groups are equally vulnerable.

Show answer
Correct Option: B
Explanation:

Low-income households typically spend a larger proportion of their income on essential goods and services, making them more vulnerable to the effects of CPI increases.

How can governments mitigate the negative impact of CPI increases on poverty?

  1. By increasing taxes on high-income households.

  2. By providing subsidies to low-income households.

  3. By implementing price controls.

  4. By raising interest rates.

Show answer
Correct Option: B
Explanation:

Providing subsidies to low-income households can help offset the increased cost of living caused by CPI increases.

What is the main challenge in accurately measuring poverty levels using CPI data?

  1. CPI data is not reliable.

  2. CPI data does not include all essential goods and services.

  3. CPI data is not adjusted for regional differences.

  4. CPI data is not collected frequently enough.

Show answer
Correct Option: B
Explanation:

CPI data typically includes a limited basket of goods and services, which may not fully capture the essential needs of all households.

Which of the following is NOT a potential consequence of high CPI inflation?

  1. Increased poverty levels

  2. Reduced purchasing power

  3. Higher interest rates

  4. Increased economic growth

Show answer
Correct Option: D
Explanation:

High CPI inflation is typically associated with negative economic consequences, such as increased poverty levels and reduced purchasing power. It is unlikely to lead to increased economic growth.

How does CPI affect the real value of wages?

  1. CPI increases the real value of wages.

  2. CPI decreases the real value of wages.

  3. CPI has no impact on the real value of wages.

  4. The relationship between CPI and real wages is complex and depends on various factors.

Show answer
Correct Option: B
Explanation:

CPI increases typically lead to higher prices for goods and services, which means that the same amount of wages can purchase fewer goods and services, effectively decreasing the real value of wages.

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

  1. Reserve Bank of India (RBI)

  2. Ministry of Finance

  3. Central Statistical Organization (CSO)

  4. National Sample Survey Organization (NSSO)

Show answer
Correct Option: C
Explanation:

The Central Statistical Organization (CSO) is responsible for calculating and publishing CPI data in India.

What is the base year for calculating CPI in India?

  1. 1960

  2. 1970

  3. 1980

  4. 2012

Show answer
Correct Option: D
Explanation:

The base year for calculating CPI in India is 2012.

How frequently is CPI data released in India?

  1. Monthly

  2. Quarterly

  3. Semi-annually

  4. Annually

Show answer
Correct Option: A
Explanation:

CPI data in India is released monthly.

Which index is used to measure the CPI for rural areas in India?

  1. Consumer Price Index for Industrial Workers (CPI-IW)

  2. Consumer Price Index for Agricultural Labourers (CPI-AL)

  3. Consumer Price Index for Rural Labourers (CPI-RL)

  4. Consumer Price Index for Urban Non-Manual Employees (CPI-UNME)

Show answer
Correct Option: C
Explanation:

The Consumer Price Index for Rural Labourers (CPI-RL) is used to measure the CPI for rural areas in India.

Which index is used to measure the CPI for urban areas in India?

  1. Consumer Price Index for Industrial Workers (CPI-IW)

  2. Consumer Price Index for Agricultural Labourers (CPI-AL)

  3. Consumer Price Index for Rural Labourers (CPI-RL)

  4. Consumer Price Index for Urban Non-Manual Employees (CPI-UNME)

Show answer
Correct Option: D
Explanation:

The Consumer Price Index for Urban Non-Manual Employees (CPI-UNME) is used to measure the CPI for urban areas in India.

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