Consider the following statements in regard to Headline inflation :
It provides an accurate picture of the inflation in the country.
It is affected by short term transitory effects on the prices of products.
Which of the statements given above is/are correct?
Options:
A . 2 only
B . Both 1 and 2
C . 1 only
D . Neither 1 nor 2
Answer: Option A Answer: (a) Headline inflation also called WPI inflation is a measure of the total inflation within an economy and is affected by areas of the market which may experience sudden inflationary spikes such as food or energy. As a result, headline inflation may not present an accurate picture of the current state of the economy as it doesn’t take account of the service sector.
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