Question

Recommendations to mpc to keep the CPI within target range?

Answer 1

Explanation:

When there is an increase in the income, and there is not any much change in the market, then to keep the target of the CPI same, what is needed is to halt the increase of consumption, due to raising of income.

Explanation:

MPC stands for Marginal Propensity to Consume whereas CPI stands for the Consumer Price Index. MPC shows the change in the income of people, which gets consumed due to the simultaneous increase in the price of the product. CPI is the weighted average of the cost of goods one purchases.

Answer 2

The monetary policy needs to be controlled to keep the level of inflation within the 'target range'. The MPC includes the time period between the changes in the policy and its economic impact. The recommendation to the 'Monetary Policy Committee' is to keep the level of inflation within the range of the target.

Explanation:

• The 'Monetary Policy Committee' (MPC) has a major role to play in controlling the inflation level within the target.  

• If there is any change in the level of income of the people then they use it for buying the goods and services which increases the 'consumer price index' (CPI).  

• The government of India in 'consultation with RBI' set the inflation target once in five years for the country.

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