UPSC Prelims 2026 CSAT Paper II · Q17 of 70 Comprehension medium

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 assumptions is/are valid? 1. Deflation strategies can be used to make manufacturers appear to be doing better than they actually are. 2. When input and output prices are both deflated against a single input price, it is referred to as 'double deflation'. Select the answer using the code given below.

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

Why the answer is (a)

• The passage states that using the same deflator for inputs and outputs, as in India, can make a manufacturer appear more productive when real value added has not changed, validating statement 1.

• 'Double deflation' is explicitly defined in the passage as a method where input and output prices are deflated separately, not against a single input price.

• Therefore, statement 2 is incorrect because it misdefines the term 'double deflation' by describing the single-deflator method instead.

• Since only statement 1 is valid based on the text, option (a) is the correct answer.

Why the other options are wrong

(b) 2 only
Statement 2 is invalid because 'double deflation' involves deflating input and output prices separately, not against a single input price.
(c) Both 1 and 2
Statement 2 is invalid because it incorrectly defines 'double deflation' as using a single deflator, whereas the passage defines it as separate deflation of inputs and outputs.
(d) Neither 1 nor 2
Statement 1 is valid because the passage confirms that using the same deflator can falsely indicate increased productivity, making the claim that neither is valid incorrect.

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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