Unit 9: Index Numbers - Practice Quiz

1 What does an index number primarily measure?

2 Which index is commonly used to measure changes in the cost of living?

3 In an index number series, the value assigned to the base year is usually:

4 If a price index rises from to , what does it indicate?

5 Which type of index number measures changes in the physical volume of goods?

6 Why are index numbers often called economic barometers?

7 Which formula represents the simple aggregative price index?

8 A price relative for a commodity is calculated using which formula?

9 Which quantities are used as weights in the Laspeyres price index?

10 Which quantities are used as weights in the Paasche price index?

11 Fisher's ideal price index is the geometric mean of which two indices?

12 What is the main feature of an unweighted index number?

13 In a fixed-base index, each year's value is compared with:

14 In a chain-base index, each year's value is initially compared with:

15 Which formula represents the Laspeyres price index?

16 Which formula represents the Paasche price index?

17 Which test checks whether reversing the base and current periods gives the reciprocal index?

18 Which test requires the product of the price index and quantity index to equal the value index?

19 Which index number satisfies both the time reversal test and the factor reversal test?

20 What does the unit test require from an index number?

21 A worker's salary rises by while the cost-of-living index rises from to . What happens to the worker's approximate real purchasing power?

22 A company's sales increase from lakh to lakh while its price index rises from to . What is the best conclusion about the volume of sales?

23 Why is an index number more useful than the price change of a single commodity when measuring inflation?

24 The consumer price index rises from to . By approximately what percentage should a fixed allowance increase to preserve its purchasing power?

25 Prices of three goods change from in the base year to in the current year. What is the simple aggregative price index?

26 What is a major weakness of the simple aggregative price index?

27 The price relatives of three commodities are , , and . What is their simple arithmetic mean index?

28 Two commodities have price relatives of and . What is the index obtained using the geometric mean of price relatives?

29 For two goods, , , and . What is the Laspeyres price index?

30 For two goods, , , and . What is the Paasche price index?

31 If the Laspeyres price index is and the Paasche price index is , what is Fisher's ideal price index?

32 A consumer price index uses weights , , and for three groups whose price relatives are , , and . What is the weighted average index?

33 Why may the Laspeyres price index overstate the rise in the cost of living?

34 Which quantity weights are used in the Paasche price index?

35 Which expression gives the quantity weights used by the Marshall–Edgeworth price index?

36 An index with 2015 as base has values for 2018 and for 2022. If 2018 is made the new base, what is the revised index for 2022?

37 An index gives and . What does the time-reversal test indicate?

38 A price index is , while the corresponding value index is . If the factor-reversal test holds, what must the quantity index be?

39 Which index-number formula generally satisfies both the time-reversal test and the factor-reversal test?

40 Which condition must hold for an index number to satisfy the circular test over periods , , and ?

41 A firm's nominal sales index rises from to , while a compatible Fisher price index rises from to . If the price and quantity indexes satisfy the factor-reversal test, what is the implied quantity index?

42 A cost-of-living index remains at , although food prices rise sharply and communication prices fall sharply. Which conclusion is statistically justified?

43 Nominal output has an index of , and its compatible price deflator is . Assuming the indexes obey factor reversal, what is the approximate real-output index?

44 A statistical agency must measure inflation when product quality changes rapidly and obsolete products disappear. Which strategy best addresses the underlying index-number problem?

45 For two commodities, , , , and . What is Fisher's ideal price index?

46 Two goods have price relatives and . Their shares in current-period expenditure are and , respectively. What is the Paasche price index?

47 If the Laspeyres and Paasche price indexes are and , respectively, what is Fisher's ideal index?

48 Two goods have prices changing from to . The simple aggregative price index is initially . If only the first good is re-quoted in cents rather than dollars in both periods, what does the same method produce?

49 Which weighted average of price relatives is algebraically identical to the Laspeyres aggregative price index?

50 Given , , , and , calculate the Marshall–Edgeworth price index.

51 For , , , and , what is the Walsh price index using weights ?

52 Successive annual link relatives are , , and . Taking the index before the first link as , what is the final chain-base index?

53 A direct fixed-base index gives , while link indexes give and . What is the chain index for period , and what does the difference indicate?

54 An index on an old base equals in the current period. The old-base index for the proposed new base period is . What is the approximately rebased current index?

55 Four price relatives are , , , and . What is their unweighted geometric-mean price index?

56 Current-period quantities are unavailable, but base-period quantities and both periods' prices are known. Which standard weighted aggregative price index remains directly computable?

57 A price index from period to period is . If it satisfies the time-reversal test, what must the reverse index be when indexes are expressed with base ?

58 A price index is , and the corresponding value index is . If the system satisfies the factor-reversal test, what must the quantity index be?

59 In ratio form, and . What value of is required by the circular test?

60 Suppose and , where and denote Laspeyres and Paasche price-index ratios expressed as percentages. Which pair gives the Fisher indexes and ?