Which of the following statements is/are correct? 1. A price index captures the change in the average price of a constant basket of commodities. 2. If the price index takes values 100, 110 and 121 in three consecutive years respectively, then the inflatio

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Q: 102 (CDS-I/2024)
Which of the following statements is/are correct?
1. A price index captures the change in the average price of a constant basket of commodities.
2. If the price index takes values 100, 110 and 121 in three consecutive years respectively, then the inflation rates in the 2nd and 3rd years are 10% and 21% respectively.
Select the correct answer using the code given below.

question_subject: 

Economics

question_exam: 

CDS-I

Statement 1 is correct because a price index measures changes in the average price level of a fixed basket of goods and services over time. Statement 2 is also correct because the inflation rate calculated from the given index values for the 2nd and 3rd years would be 10% and 10% respectively.