Daily Current Affairs Quiz: September 03, 2025

Answer: B [1 and 2 only]
Explanation:

Statement 1 is correct: Headline inflation measures total inflation including all items in the basket, including food and fuel, which are often volatile. It represents the broader trend of price rise in the economy.

Statement 2 is correct: Core inflation excludes food and fuel due to their volatile nature. This provides a clearer view of the underlying inflation trend for policymakers.

Statement 3 is incorrect: RBI mainly uses CPI (Combined) to track inflation, but it considers other indicators too, such as WPI and core inflation, when making policy decisions.

Answer: D [1, 2 and 3]
Explanation:

Pair 1 is correct: Cost-push inflation occurs due to rising production costs (e.g., wages, raw materials), pushing final prices higher.

Pair 2 is correct: Stagflation is a rare economic condition marked by stagnation (low or negative growth) alongside high inflation.

Pair 3 is correct: Hyperinflation involves extremely rapid and uncontrollable price increases, often due to excessive money supply or economic collapse.

Answer: C [Both 1 and 2]
Explanation:

Statement 1 is correct: When overall BoP is in deficit, the central bank uses its forex reserves to bridge the gap, leading to depletion of reserves.

Statement 2 is correct: Capital inflows like FDI or loans can finance current account deficits, keeping the overall BoP balanced.

Answer: D [Inflow of foreign exchange exceeds outflow]
Explanation:

Option (a) is incorrect: If a country is importing more than it exports, it leads to a current account deficit, not a surplus. This situation contributes to a BoP deficit unless it’s offset by capital inflows. Thus, this condition typically indicates a negative balance, not a surplus.

Option (b) is incorrect: Forex reserves decrease when there’s a BoP deficit and the central bank uses its reserves to cover the gap. In case of a BoP surplus, inflows exceed outflows, so reserves increase, not decrease. Hence, this is the opposite of what a surplus entails.

Option (c) is incorrect: A capital account deficit indicates that more capital is flowing out of the country than coming in (e.g., FDI outflows, debt repayments). If not offset by a current account surplus, it would lead to a BoP deficit, not a surplus. Hence, this cannot indicate a BoP surplus on its own.

Option (d) is correct: A BoP surplus occurs when total foreign exchange inflows (from trade, remittances, investments) exceed outflows, resulting in a net gain in reserves.

Answer: A [1 only]
Explanation:

Statement 1 is correct: Inflation means a rise in general price levels, reducing how much goods or services can be purchased with a unit of currency.

Statement 2 is incorrect: Moderate inflation can be beneficial or harmful depending on policy responses. It often signals demand and growth but isn’t entirely neutral in impact.