Inflation – WPI, CPI, food basket, types & stages of inflation Quiz - ICSE Class 10 Economics

Free practice quiz: Inflation – WPI, CPI, food basket, types & stages of inflation (ICSE Class 10 Economics). 47 multiple-choice questions with answers and explanations. Play online, no sign-up needed.

This ICSE Class 10 Economics practice quiz has 47 multiple-choice questions on Inflation – WPI, CPI, food basket, types & stages of inflation, and 47 of them come with an explanation. Try the 5 sample questions below (tap an option to check yourself), then play the full quiz online. No sign-up needed.

Sample questions

1. Which index measures changes in the wholesale prices of goods in India, excluding services?

   1. Consumer Price Index (CPI)
   2. Wholesale Price Index (WPI)
   3. Index of Industrial Production (IIP)
   4. Producer Price Index (PPI)
   Show answer

   Answer: B. Wholesale Price Index (WPI)

   The Wholesale Price Index (WPI) in India tracks the changes in prices of commodities at the wholesale level, and it specifically excludes services.

2. The 'food basket' used for CPI calculations aims to represent:

   1. The cost of a fixed basket of goods and services purchased by consumers over time.
   2. The wholesale price of agricultural produce.
   3. The export prices of essential food commodities.
   4. The cost of production for food manufacturers.
   Show answer

   Answer: A. The cost of a fixed basket of goods and services purchased by consumers over time.

   The CPI measures changes in the price of a 'basket' of goods and services that is representative of typical consumer spending. The composition of this basket is updated periodically to reflect changing consumption patterns.

3. The inclusion of services in the CPI, but not in the WPI, contributes to:

   1. A lower measured inflation rate in CPI than WPI.
   2. A higher measured inflation rate in CPI than WPI, if service costs are rising faster.
   3. No difference in the measured inflation rate between CPI and WPI.
   4. An inverse relationship between CPI and WPI.
   Show answer

   Answer: B. A higher measured inflation rate in CPI than WPI, if service costs are rising faster.

   Since the CPI includes services and WPI does not, if the prices of services are increasing at a faster rate than the prices of goods (which are captured by WPI), the CPI will show a higher inflation rate. This is a common scenario in many economies.

4. Which of the following is a key component of the WPI basket in India?

   1. Rent paid by consumers
   2. Cinema tickets
   3. Vegetables and fruits at wholesale markets
   4. Private car maintenance
   Show answer

   Answer: C. Vegetables and fruits at wholesale markets

   The WPI includes primary articles, which encompasses agricultural commodities like vegetables and fruits, priced at the wholesale level.

5. What is the primary difference between deflation and disinflation?

   1. Deflation is a decrease in the rate of inflation, while disinflation is a decrease in the general price level.
   2. Deflation is a decrease in the general price level, while disinflation is a decrease in the rate of inflation.
   3. Deflation only affects goods, while disinflation affects services.
   4. There is no significant difference; the terms are interchangeable.
   Show answer

   Answer: B. Deflation is a decrease in the general price level, while disinflation is a decrease in the rate of inflation.

   Deflation means the overall price level is falling (negative inflation). Disinflation means that while prices are still rising, the rate at which they are rising is slowing down.

More questions in this quiz

Answers and explanations are in the full quiz.

1. Inflation where prices rise at a rapid pace, making currency lose value quickly, is known as:
2. A situation where the general price level is rising, but economic growth is stagnant or declining, is termed as:
3. Which of the following is a primary cause of demand-pull inflation?
4. Cost-push inflation is typically caused by:
5. If the WPI increases by 5% and the CPI increases by 7% in the same period, what can be inferred?
6. Consider a scenario where inflation is slowly rising but the economy is growing steadily. This is often described as:
7. Which of the following components is typically NOT included in the calculation of the Wholesale Price Index (WPI)?
8. When inflation is moderate and persistent, leading to gradual increases in the price level, it is known as:
9. If the WPI is rising significantly, it can be an early indicator of future increases in:
10. Which of the following is most likely to cause inflation if the government prints excessive amounts of money?
11. A sustained decrease in the general price level is known as:
12. Which stage of inflation is characterized by a very rapid increase in prices, often leading to economic instability and a loss of confidence in the currency?
13. The CPI basket typically includes a larger weight for food items compared to WPI because:
14. When a sudden increase in oil prices leads to higher production costs across various industries, this is an example of:
15. Galloping inflation is typically associated with price increases in the range of:
16. Which of the following is NOT a typical consequence of high inflation?
17. Inflation that results from an increase in the money supply without a corresponding increase in the output of goods and services is primarily classified as:
18. Which index is more closely related to the 'cost of living' for the average consumer?
19. A persistent period of low or negative inflation coupled with a contracting economy is known as:
20. If the CPI basket is updated to include more durable goods and fewer perishable items, this would indicate a shift in:
21. Which type of inflation arises from structural rigidities in the economy, such as supply chain bottlenecks or inefficient markets?
22. If a country experiences hyperinflation, which of the following is most likely to happen to its currency's exchange rate?
23. When inflation is at a moderate level, say 3-5% annually, and the economy is growing, this is generally considered:
24. The term 'inflationary expectations' refers to:
25. If the government decides to increase taxes to curb inflation, it is primarily attempting to reduce:
26. When inflation is high and volatile, it makes it difficult for businesses to:
27. If the CPI rises by 2% and the WPI falls by 1% in a period, this suggests:
28. Which stage of inflation is characterized by prices rising so rapidly that they become practically meaningless, often leading to a breakdown of the monetary system?
29. The difference between the weightage given to food items in the CPI basket and the WPI basket primarily reflects:
30. Which of the following is a common feature of cost-push inflation?
31. If a country's CPI is rising at 8% annually, and its WPI is rising at 4% annually, this scenario indicates:
32. Built-in inflation, often linked to the wage-price spiral, is characterized by:
33. The 'food basket' in the CPI is typically re-evaluated and updated periodically to:
34. If the WPI is heavily influenced by a surge in global commodity prices, this would most directly contribute to:
35. Consider a situation where unemployment is high, but prices are also rising rapidly. This economic condition is known as:
36. Which of the following is a key characteristic of the 'food basket' used in CPI calculations in India?
37. A sustained period of moderate inflation (e.g., 3-6% per year) is often preferred by economists over zero inflation because it:
38. If the government reduces interest rates significantly to stimulate the economy, and this leads to a broad increase in demand, what type of inflation is most likely to follow?
39. Which of the following is a consequence of inflation for individuals on fixed incomes, such as pensioners?
40. When the WPI and CPI are both rising, but the CPI is rising at a faster pace, it strongly suggests that:
41. Which of the following describes 'disinflation'?
42. The concept of a 'food basket' is most directly associated with the measurement of:

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