ECONOMICS (CBSE/UGC NET)

Detailed explanation-1: -The weights are meant to reflect the relative importance of the goods and services as measured by their shares in the total consumption of households. The weight attached to each good or service determines the impact that its price change will have on the overall index.

Detailed explanation-2: -The correct answer is A. CPI includes products that are widely used, while the GDP price index includes all goods and services. The CPI does not include all the goods and services. Measurements of CPI depend on the fixed basket of goods.

Detailed explanation-3: -Chain-weighted CPI, or chained CPI, is an alternative measurement for the Consumer Price Index (CPI) that considers changes to consumer spending patterns to provide a more accurate picture of the cost of living based on the goods that consumers actually buy.

Detailed explanation-4: -The consumer price index is an imperfect measure of the cost of living for the following three reasons: substitution bias, the introduction of new goods, and unmeasured changes in quality. Because of measurement problems, the CPI overstates annual inflation by about 1 percentage point.