Tag: index numbers

Questions Related to index numbers

If all the values are of equal importance, the index numbers are called: 

business mathematics and statistics applied statistics weighted methods to calculate index numbers construction of index numbers index numbers

  1. Weighted

  2. Unweighted

  3. Composite

  4. Value index

Show answer
Correct Option: B
Explanation:

$\Rightarrow$  If all the values are of equal importance, the index numbers are called: $Unweighted$.

$\Rightarrow$  There are two methods of constructing unweighted index numbers: $(1)$ Simple Aggregative Method $(2)$ Simple Average of Relative method.
$\Rightarrow$  Simple Aggregative Method - In this method, the total price of commodities in a given (current) year is divided by the total price of commodities in a base year and expressed as percentage.
$\Rightarrow$  Simple Average of Relative method - In this method, we compute price relatives or link relatives of the given commodities and then use one of the averages such as the arithmetic mean, geometric mean, median, etc.

Using $2005$ as base year , the price of a commodity in $2007$ is 125. Calculate the index number for 2007 if 2006 is taken as the base year.

business mathematics and statistics applied statistics weighted methods to calculate index numbers construction of index numbers index numbers

  1. 105.93

  2. 104.23

  3. 103.93

  4. 112.3

Show answer
Correct Option: A

Using $2005$ as base year , the price of a commodity in $2006$ are 118. Calculate the index number for 2005 if 2006 is taken as the base year.

business mathematics and statistics applied statistics weighted methods to calculate index numbers construction of index numbers index numbers

  1. 84.75

  2. 82.18

  3. 81.18

  4. 78.07

Show answer
Correct Option: A
Explanation:

$N=1$ (Since only one commodity)

Take price $=Rs.100$  as base price for $2005$
$\implies p _1=100$
$p _0=118$ (given)
$\implies $ index no. $=\cfrac{1}{N}(\sum\cfrac{p _1}{p _0}\times 100)$
$\implies\cfrac{1}{1}(\sum\cfrac{100}{118}\times 100)=84.775\approx 84.75$

Index for base period is always taken as: 

business mathematics and statistics introduction to index number introduction to index numbers index numbers applied statistics

  1. $100$

  2. $1$

  3. $200$

  4. $0$

Show answer
Correct Option: A
Explanation:

$\Rightarrow$  Index for base period is always taken as : $100$.

$\Rightarrow$  A base year is the first of a series of years in an economic or financial index. It is typically set to an arbitrary level of 100. 
$\Rightarrow$  New, up-to-date base years are periodically introduced to keep data current in a particular index. 
$\Rightarrow$  Any year can serve as a base year, but analysts typically choose recent years.

An index number that can serve many purposes is called:

business mathematics and statistics introduction to index number introduction to index numbers index numbers applied statistics

  1. General purpose index

  2. Special purpose index

  3. Cost of living index

  4. None of them

Show answer
Correct Option: A
Explanation:

An index number that can serve many purposes is called general purpose index.

_____ indicates the changes in monetary value

business mathematics and statistics introduction to index number introduction to index numbers index numbers applied statistics

  1. Price Index

  2. Cost Index

  3. GDP Reflector

  4. All the above

Show answer
Correct Option: A
Explanation:

Price Index indicates the changes in monetary value.

Price relatives are a percentage ratio of current year price and:

business mathematics and statistics introduction to index number introduction to index numbers index numbers applied statistics

  1. Base year quantity

  2. Previous year quantity

  3. Base year price

  4. Current year quantity

Show answer
Correct Option: C
Explanation:

$\Rightarrow$  Price relatives are a percentage ratio of current year price and $Base\, year\, price$.

$\Rightarrow$  Thus, $Price\, relative=\dfrac{P _1}{P _0}\times 100,$ where $P _0$ is the price in the base year and $P _1$ of corresponding commodity in present year (for which index is to be calculated)

Index numbers are expressed in:

business mathematics and statistics introduction to index number introduction to index numbers index numbers applied statistics

  1. Ratios

  2. Squares

  3. Percentages

  4. Combinations

Show answer
Correct Option: C
Explanation:

$\Rightarrow$  Index numbers are expressed in : $Percentage$.

$\Rightarrow$  Index numbers are expressed in terms of percentages to show the extent of relative change.
$\Rightarrow$  Index numbers measure relative changes. They measure the relative change in the value of a variable or a group of related variables over a period of time or between places.
$\Rightarrow$  Index numbers measures changes which are not directly measurable.

Why do we need an index number?

business mathematics and statistics introduction to index number introduction to index numbers index numbers applied statistics

  1. helpful in measuring changes in value of money

  2. helful for business community

  3. in measuring labour quality

  4. All the above

Show answer
Correct Option: A,B
Explanation:

We need an index number because it is helpful in measuring changes in value of money and it is also helpful for business community.

Index numbers can be used for:

business mathematics and statistics introduction to index number introduction to index numbers index numbers applied statistics

  1. Forecasting

  2. Fixed prices

  3. Different prices

  4. Constant prices

Show answer
Correct Option: A
Explanation:

Index number can be used for Forecasting.
This index number is a useful number that helps us quantify changes in our field. It is easier to see one value than a thousand different values for each item in our field.