Q. Consider the following statements:
1.Retail inflation is also known as Consumer Price Index (CPI) inflation.
2.Retail inflation measures the rise in prices of raw materials for industries.
3.A high retail inflation would lead to decreased cost of living for the consumers.
4.A rising retail inflation would decrease the value of money over time.
How many of the statements given above are correct?
Explanation –
Statements 1 and 4 are correct. Retail inflation refers to the Consumer Price Index (CPI) inflation, which measures the average change in prices of goods and services consumed by households over time. Rising retail inflation decreases the value of money over time. As prices increase, the same amount of money can buy fewer goods and services, reducing its real value and purchasing power.
Statements 2 and 3 are incorrect. Retail inflation doesn’t measure the rise in prices of raw materials for industries. It focuses on the prices of goods and services consumed by individuals and households. High retail inflation means an increase in the prices of consumer goods and services, leading to a higher cost of living for consumers. As prices rise, people’s purchasing power decreases, making it more expensive to maintain the same standard of living.
Source: Forum IAS
