Q. Consider the following statements:

1. Core inflation is primarily demand driven.
2. Core inflation includes items that experience frequent and volatile price movements.

Which of the above statement(s) is/are correct?
Answer: Neither 1 nor 2
Notes: Core inflation is demand driven as it reflects underlying price trends excluding temporary fluctuations. However, it specifically excludes items with volatile prices, such as food and energy. Therefore, statement 1 is correct while statement 2 is incorrect. The correct answer is that neither 1 nor 2, taken together, is correct.