Which of the following is not a characteristic of Consumer's Price Index (CPI) number?
Last updated Jun 24, 2026
Correct Answer:
Option D —
An important component in Fiscal Deficit
The Consumer Price Index (CPI) is a macroeconomic tool used to track changes in the price level of a basket of consumer goods and services purchased by households.
Why A, B, and C are characteristics: * Purchasing Power: CPI is the primary metric for calculating how much money's value has eroded due to inflation.
Inflation: It is the standard index used by central banks and governments to track the rate of inflation.
Wage Negotiations: CPI is frequently used to determine "Cost of Living Adjustments" (COLA) for employees, helping to adjust wages so they keep pace with rising prices.
Why D is NOT a characteristic:
Fiscal Deficit refers specifically to the difference between a government's total expenditure and its total revenue (excluding borrowings). While inflation (measured by CPI) can indirectly influence government spending, the CPI calculation itself is not a component used to derive the fiscal deficit figure.
Answer verified by Quintessence Classes faculty — Karan Nagar, Srinagar.
