Question 1

What is an index number?

Accepted Answer

a) A statistical measure used to show the percentage change in a variable

Answer

c) A unique identifier for a data set

Answer

d) A method of calculating averages

Answer

b) A number used to rank items in a list

Question 2

Which of the following is the most commonly used index number in economics?

Accepted Answer

b) Consumer Price Index (CPI)

Answer

c) Stock Market Index

Answer

d) Producer Price Index (PPI)

Answer

a) Human Development Index

Question 3

The base year in an index number series is:

Accepted Answer

b) The year that is used as a reference point for comparison

Answer

c) The year with the highest index number

Answer

a) The year for which the index number is calculated

Answer

d) The year with the lowest index number

Question 4

If the price index of a commodity in 2023 is 120 and the base year is 2020, what does it indicate?

Accepted Answer

b) The price of the commodity increased by 20%

Answer

a) The price of the commodity decreased by 20%

Answer

d) The price of the commodity doubled

Answer

c) The price of the commodity remained constant

Question 5

Which method of calculating index numbers uses quantities as weights?

Accepted Answer

a) Laspeyres index

Answer

c) Fisher's index

Answer

b) Paasche index

Answer

d) Marshall-Edgeworth index

Question 6

In which year is the index number of the base year always set to 100?

Accepted Answer

b) The base year

Answer

c) The previous year

Answer

d) Any selected year

Answer

a) The current year

Question 7

Which of the following index numbers is commonly used to measure inflation?

Accepted Answer

a) Consumer Price Index (CPI)

Answer

c) Stock Market Index

Answer

b) Producer Price Index (PPI)

Answer

d) Wholesale Price Index (WPI)

Question 8

The time reversal test is satisfied if:

Accepted Answer

a) P01 × P10 = 1

Answer

b) P01 + P10 = 1

Answer

d) P01 - P10 = 1

Answer

c) P01 × P10 > 1

Question 9

Which of the following is a limitation of index numbers?

Accepted Answer

b) They do not reflect qualitative changes in products

Answer

a) They cannot be used to compare data over time

Answer

c) They are always accurate

Answer

d) They measure only current year data

Question 10

The Fisher's ideal index number is the:

Accepted Answer

b) Geometric mean of Laspeyres and Paasche index numbers

Answer

a) Arithmetic mean of Laspeyres and Paasche index numbers

Answer

c) Simple average of all index numbers

Answer

d) Weighted average of all index numbers

Question 11

The Wholesale Price Index (WPI) is used to:

Accepted Answer

a) Measure the average price change of goods sold by manufacturers

Answer

d) Measure the purchasing power of a currency

Answer

c) Measure the overall economic growth of a country

Answer

b) Measure the change in prices of goods and services at the consumer level

Question 12

Which index number would be used to track changes in the cost of living?

Accepted Answer

a) Consumer Price Index (CPI)

Answer

b) Wholesale Price Index (WPI)

Answer

c) Producer Price Index (PPI)

Answer

d) Stock Market Index

Question 13

Which of the following best describes a weighted index number?

Accepted Answer

b) An index number that assigns different levels of importance to different items

Answer

d) An index number that only considers the base year

Answer

a) An index number that assigns equal importance to all items

Answer

c) An index number that measures the average of all prices

Question 14

A simple aggregative price index is calculated by:

Accepted Answer

a) Summing the prices in the current year and dividing by the sum of prices in the base year

Answer

c) Taking the geometric mean of the price relatives

Answer

d) Adding the index numbers of all items

Answer

b) Multiplying the prices of each commodity by their respective quantities

Question 15

Index numbers are used in economic analysis to:

Accepted Answer

a) Identify trends in data

Answer

d) Predict future prices

Answer

c) Measure correlation between variables

Answer

b) Calculate averages

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