UPSC Prelims Practice Questions — US ‘transitory’ inflation turns 5, is still a big brat

Question 1

With reference to the distinction between the PCE Price Index and the Consumer Price Index (CPI) in the United States, consider the following statements:
1. The PCE Price Index, not the CPI, is the Federal Reserve's preferred gauge for its longer-run 2 percent inflation target.
2. The PCE updates its expenditure weights more frequently than the CPI, which generally results in PCE inflation readings running lower than CPI readings.
3. Unlike the CPI, the PCE Price Index is compiled by the US Bureau of Labor Statistics.
Which of the statements given above is/are correct?

Accepted Answer

1 and 2 only

Answer

1 only

Answer

2 and 3 only

Answer

1, 2 and 3

Question 2

Which of the following US federal agencies compiles and releases the Personal Consumption Expenditures (PCE) Price Index, the inflation gauge the Federal Reserve uses to define its 2 percent longer-run target?

Accepted Answer

Bureau of Economic Analysis (BEA), Department of Commerce

Answer

Bureau of Labor Statistics (BLS), Department of Labor

Answer

Board of Governors of the Federal Reserve System

Answer

US Census Bureau, Department of Commerce

Question 3

During the post-pandemic US inflation surge that the Federal Reserve initially called 'transitory', what was the peak year-on-year headline Consumer Price Index (CPI) reading — the highest 12-month CPI increase recorded in the United States since the early 1980s?

Accepted Answer

9.1 per cent (June 2022)

Answer

7.0 per cent (December 2021)

Answer

8.5 per cent (March 2022)

Answer

10.4 per cent (September 2022)

Question 4

The Federal Reserve's longer-run inflation objective of exactly 2 percent, measured solely by the annual change in the Personal Consumption Expenditures (PCE) Price Index, was first formally adopted in its 'Statement on Longer-Run Goals and Monetary Policy Strategy' in the year:

Accepted Answer

2012

Answer

2008

Answer

2020

Answer

2022

UPSC Prelims Practice Questions — US ‘transitory’ inflation turns 5, is still a big brat

Q2. Which of the following US federal agencies compiles and releases the Personal Consumption Expenditures (PCE) Price Index, the inflation gauge the Federal Reserve uses to define its 2 percent longer-run target?

Q3. During the post-pandemic US inflation surge that the Federal Reserve initially called 'transitory', what was the peak year-on-year headline Consumer Price Index (CPI) reading — the highest 12-month CPI increase recorded in the United States since the early 1980s?

Q4. The Federal Reserve's longer-run inflation objective of exactly 2 percent, measured solely by the annual change in the Personal Consumption Expenditures (PCE) Price Index, was first formally adopted in its 'Statement on Longer-Run Goals and Monetary Policy Strategy' in the year: