Q76·CSAT · Prelims 2026

RC — Evaluation of Economic Deflation Strategies

Reading Comp.RC — InferenceReading Comprehension● Easy

Question

[PASSAGE] How is deflation done? Most countries use a method called 'double deflation', where input and output prices are deflated separately. Consider a manufacturer importing oil for use in production. If oil prices fall, output prices do not and quantities remain the same, real value added should not change. But if the same deflator is used for inputs and outputs, as in India, it would look as if the manufacturer had become more productive.

[QUESTION] Which of the following statements is/are correct?

1Real value should not change in the instance of static output cost and unchanged quantities against falling oil prices.

2Deflators are to be used separately for inputs and outputs, and this is a practice universally adopted by all economies.

Options

1 only

Answer

2 only

Both 1 and 2

Neither 1 nor 2

Explanation

Let us check the validity of both statements using the provided text:

Statement 1 is correct: The text explicitly notes that if input oil prices drop while output prices and production volumes stay fixed, 'real value added should not change' .

Statement 2 is incorrect: The passage states that 'Most countries' use separate input-output metrics , while explicitly highlighting that 'India' uses a single shared index instead. Therefore, the practice is not universally adopted by all economies.

Valid inferences must respect explicit exceptions highlighted in the text, making broad claims of universal adoption incorrect.

Answer: (a).

Question details

Year

2026

Paper

CSAT

Question

Q76

Section

Comprehension

Sub-topic

RC — Inference

Type

Reading Comprehension

Difficulty

Easy

Source hint

RC passage — macroeconomic accounting indices

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