Multiple choice

Consider the following facts about core inflation.

  1. It is measured for a short period of time.
  2. Items with volatile price fluctuations are excluded from its calculation.

Which of the above statements is/ are correct?

  1. 1 only

  2. 2 only

  3. 1 and 2 both

  4. Neither 1 nor 2
Reveal answer Fill a bubble to check yourself
B Correct answer
Explanation

Core inflation represents the long run trend in the price level. In measuring long run inflation, transitory price changes should be excluded. One way of accomplishing this is by excluding items frequently subject to volatile prices, like food and energy.

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