With reference to the Consumer Price Index (CPI) basket and its limitations, consider the following statements:

Question

The CPI basket includes items such as torches, radios, tape recorders, CDs, DVDs, and trunks, which are no longer relevant in modern consumption patterns.

The weight allocation in the CPI basket is fixed and does not change over time.

The high weight assigned to cereals in the current CPI is considered excessive and fails to account for dietary shifts and government welfare programs.

The absence of up-to-date consumption expenditure data hampers the accurate reflection of changing consumption patterns in the CPI.

How many statements given above are correct?

(a) Only one statement

(b) Only two statements

(c) Only three statements

(d) All four statements

Answer 1

Answer: [Option (c)] Only three statements

Explanation:

Statement 1 is correct as the article mentions that the CPI basket includes outdated items that no longer hold relevance in modern consumption patterns.

Statement 2 is incorrect as the article highlights that the CPI basket should reflect evolving needs and preferences, indicating that the weight allocation can change over time.

Statement 3 is correct as the article points out that the high weight assigned to cereals in the current CPI is considered excessive and fails to account for dietary shifts and government welfare programs.

Statement 4 is correct as the article states that the absence of up-to-date consumption expenditure data poses challenges in accurately reflecting changing consumption patterns in the CPI.

Therefore, only three statements (1, 3, and 4) are correct.