UPSC Prelims 2026 CSAT Paper II · Q16 of 70 Comprehension hard

Passage

Directions for the next 2 (two) items : Read the following passage and answer the items that follow. Your answers should be based solely on the passage. 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.

Which of the following statements is/are correct? 1. Real value should not change in the instance of static output cost and unchanged quantities against falling oil prices. 2. Deflators are to be used separately for inputs and outputs, and this is a practice universally adopted by all economies. Select the answer using the code given below.

  1. (a) 1 only
  2. (b) 2 only
  3. (c) Both 1 and 2
  4. (d) Neither 1 nor 2 ✓ UPSC's answer

Why the answer is (d)

• Statement 1 is incorrect because the passage states that if oil prices fall while output prices and quantities remain the same, the 'real value added' should not change, not the 'real value' as a whole.

• Statement 2 is incorrect because the passage explicitly notes that India uses the same deflator for inputs and outputs, which contradicts the claim that separate deflation is a practice universally adopted by all economies.

• Since both statements contain factual inaccuracies or misinterpretations of the passage, neither is correct.

• Therefore, the correct option is (d) Neither 1 nor 2.

Why the other options are wrong

(a) 1 only
Statement 1 is incorrect because the passage specifies that 'real value added' remains unchanged, not 'real value'.
(b) 2 only
Statement 2 is incorrect because the passage states that India uses the same deflator for inputs and outputs, proving it is not a universal practice.
(c) Both 1 and 2
Both statements are incorrect; Statement 1 misidentifies the metric as 'real value' instead of 'real value added', and Statement 2 falsely claims universal adoption of separate deflators.

Asked in the CSAT Paper II of the UPSC Civil Services Preliminary Examination 2026, held on 24 May 2026. Question and answer key: Union Public Service Commission. Explanation: UPSC Answer Check.

Reading the answer is not the same as getting it right under a clock. Practise this question with UPSC's negative marking, and anything you miss goes into an error notebook until you get it right twice.

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