Economics • Indian EconomyEasy
What does the term 'Core Inflation' measure in the context of the Indian economy?
A. Headline inflation minus the volatile components of food and energy prices✓ Correct Answer
B. Inflation rate calculated solely based on agricultural commodities
C. The rate of price increase of imported capital goods only
D. Wholesale price inflation weighted by manufactured goods
💡 Solution & Explanation
Core inflation measures headline inflation after excluding volatile food and energy components that experience frequent short-term price shocks. Other choices incorrectly restrict the index to agricultural goods or imported capital assets alone. Central banks monitor core inflation to gauge underlying demand pressures and formulate monetary policy rates. Banking examinations frequently distinguish between headline and core inflation indices.
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