# Index Numbers

## Online MCQs Based on Index Numbers

This Post Contains Multiple Choice Questions from Introductory Statistics for the preparation of exams and different tests. This page includes the Online MCQs Based on Index Numbers for the preparation of different statistics and job-related examinations. Let us start with the MCQs based on Index Numbers, which is the first quiz on index numbers.

Multiple Choice Questions about Index Number. The test about Index Numbers for the preparation of FPSC Statistical Officer will help you in online preparation for the post of Lecturer, Statistical Officer, and other statistics-related jobs.

• Construction of Index Numbers follows steps (i) Object of Index Number, (ii) Choice of items, (iii) Choice of Base Period, (iv) Collection of Prices of Items, (v) Choice of Average, (vi) Selection of Proper Weights
• Fixed Base Method
• Chain Base Method
• Composite Index Numbers
• Un-weighted index Numbers which include (i) Simple Aggregative Index Numbers, (ii) Simple Average of Relatives Index Numbers
• Weighted Index Numbers include (i) Weighted Aggregative Index Numbers, (ii) Weighted Average of Relatives Index Numbers
• The Weighted Aggregative Index Numbers include (i) Laspeyre’s Index Number, (ii) Paasche’s Index Number, (iii) Fisher Idea Index Number, Value Index Number,
• Consumer Price Index Numbers. The important steps in the construction of CPI numbers include (i) Choosing the class of people, (ii) Selection of commodities, (iii) Budget Inquiry, (iv) Collection of Prices, (v) Calculation of CPI Numbers

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## Index Numbers An Introduction

The index numbers are numbers that “measure a relative change in a variable or an average relative change in a group of related variables concerning a base”. An index number indicates the level of certain phenomena at some given period in comparison with the level of the same phenomena at some reference period. The index numbers are usually constructed for economic variables such as price, quantity, wage, unemployment, investment, cost of living, etc.

Index numbers are free from units of measurement because they show relative changes. For ease of understanding, index numbers are expressed in percentages. To construct an index number at least two periods are required and a period that is economically stable and has no major crisis caused by wars, diseases, strikes, food shortage, etc. known as the normal period is selected as a base. Index numbers of wholesale prices and consumer prices, etc. are published by the Federal Bureau of Statistics and State Bank of Pakistan.

### Uses/ Need of Index Numbers

There are many uses for index numbers but the most important are:

• Many economic plans and Government policies depend on index numbers, for example, to control rising prices of government imports from other countries or give subsidies (financial support) to the manufacturer.
• The Price index number is used to know the purchasing ability of money at different periods and places.
• The quantity index number is used to know the changes in the quantities produced, consumed, sold, purchased, imported or exported, etc.
• Consumer price index numbers are used to know people’s standards of living and the goods and services used by them.
• Index numbers are used to forecast future economic trends
• Cyclical (long-term movements, which are in the form of oscillation) and seasonal (short-term movements, which are linked with the seasons or movements that repeat themselves within a fixed period) movements are measured by index number.

### Shortcomings of Index Number

Index numbers can not be used freely due to the following shortcomings:

• An improper base period gives misleading results. Base periods must be free from all types of crises caused by wars, diseases, strikes, food shortages, etc. If such a period is not available then the average of some or all the periods is selected as the base.
• Selection of favorite commodities is difficult because the use of services and commodities by individuals varies with the locality of people, social customs, standard of living, occupation, ideas of saving, courage of investment, and sources of income, etc.
• The quality of a product cannot be observed at each point, that is, ball-to-ball commentary is difficult. For example, if we want to view the quality of cloth at each thread before purchasing it becomes impossible.
• Index number gives a rough measure of relative changes because sampling error or error of measurement may occur at the stages of gathering data or the base period may be improper or the number of commodities may be less than required. According to Dr. Arriving Fisher, the accuracy of index numbers may be increased by increasing the number of commodities.
• Different methods of index numbers usually give different results.
• Prices vary from place to place according to the idea of profit of investors, expenditures on transportation, and awareness about the psychology of buyers, hence their collection is difficult.

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## MCQs Index Numbers Quiz 5

Multiple Choice Questions from Introductory Statistics for the preparation of exams and different tests. This page includes the MCQs Index Numbers Quiz for the preparation of different statistics and job-related examinations. Let us start with the MCQs index numbers, which is the fifth quiz of index numbers.

Multiple Choice Questions from Introductory Statistics for the preparation of exams and different tests. This page includes the MCQs Quiz Index Numbers for the preparation of different statistics and job-related examinations.

1. Computing methods of consumer price index are

2. The aggregate expenditure method and family budget method give

3. Which of the following statements about the base time is/are correct?

4. Another name for consumer price index number is

5. The index number given by $\frac{\Sigma p_nq_0}{\Sigma p_0q_0}\times 100$ is

6. Retail price index numbers are also called

7. Fisher’s index number is _______ of Laspeyres and Paasche’s index numbers

8. Current year quantities are used as weights in

9. If a price index is 104, which of the following statements is/are correct about average prices?

10. Base year weighted index numbers are

11. Paasche’s price index number is

12. Complete the following table in which a chain-based index is being converted to one with a fixed base 1997.

13. Complete the following table which shows two index number series being spliced together to give a single series based on 1997. Give your answers correct to one dp.

14. If the price index ($100\times \left(\frac{\Sigma wP_1}{\Sigma wP_0}\right)$) calculated was 104, estimate the budget for the next quarter, giving your answer to the nearest $\$000$. You are assisting with the work on a maintenance department’s budget for the next quarter of 2000. The maintenance department’s budget for the current quarter (just ending) is$\$200,000$. Its use of materials, and their respective prices, are shown below.

15. If $\Sigma p_1q_0=403$, $\Sigma p_0q_0=283$, then index number is

16. Which method of construction of CPI number is the Laspeyres index number

17. In 2000, the retail price index was 178 with 1990 = 100. Convert a weekly wage of $400 back to 1990 constant prices, giving your answer correct to the nearest penny. 18. Calculate the required index, using the formula$100\times \left(\frac{\Sigma wP_1}{\Sigma wP_0}\right)$giving your answer to one dp. 19. Express the following average weekly wages as index numbers with base 1998 to 1 dp 20. You are assisting with the work on a maintenance department’s budget for the next quarter of 2000. The maintenance department’s budget for the current quarter (just ending) is$200,000. Its use of materials, and their respective prices, are shown below.

You require an all-item price index for materials for the next quarter, using the current quarter as a base and the current quantities as weights. Complete the table by filling in the appropriate numerical value in the spaces indicated by the letters.

The test about Index Numbers for the preparation of FPSC Statistical Officer will help you in online preparation for the post of Lecturer, Statistical Officer, and other statistics-related jobs.

• Construction of Index Numbers follows steps (i) Object of Index Number, (ii) Choice of items, (iii) Choice of Base Period, (iv) Collection of Prices of Items, (v) Choice of Average, (vi) Selection of Proper Weights
• Fixed Base Method
• Chain Base Method
• Composite Index Numbers
• Un-weighted index Numbers which include (i) Simple Aggregative Index Numbers, (ii) Simple Average of Relatives Index Numbers
• Weighted Index Numbers which include (i) Weighted Aggregative Index Numbers, (ii) Weighted Average of Relatives Index Numbers
• The Weighted Aggregative Index Numbers include (i) Laspeyre’s Index Number, (ii) Paasche’s Index Number, (iii) Fisher Idea Index Number, Value Index Number,
• Consumer Price Index Numbers. The important steps in the construction of CPI numbers include (i) Choosing the class of people, (ii) Selection of commodities, (iii) Budget Inquiry, (iv) Collection of Prices, (v) Calculation of CPI Numbers

### MCQs Index Numbers

• Express the following average weekly wages as index numbers with base 1998 to 1 dp
• Base year weighted index numbers are
• Current year quantities are used as weights in
• Paasche’s price index number is
• The index number given by $\frac{\Sigma p_nq_0}{\Sigma p_0q_0}\times 100$ is
• If $\Sigma p_1q_0=403$, $\Sigma p_0q_0=283$, then index number is
• Fisher’s index number is _ of Laspeyres and Paasche’s index numbers
• Computing methods of consumer price index are
• Retail price index numbers are also called
• Another name for consumer price index number is
• The aggregate expenditure method and family budget method give
• Which method of construction of CPI number is the Laspeyres index number
• In 2000, the retail price index was 178 with 1990 = 100. Convert a weekly wage of $400 back to 1990 constant prices, giving your answer correct to the nearest penny. • Complete the following table which shows two index number series being spliced together to give a single series based on 1997. Give your answers correct to one dp. • Complete the following table in which a chain-based index is being converted to one with a fixed base 1997. Give your answers correct to one decimal place. • You are assisting with the work on a maintenance department’s budget for the next quarter of 2000. The maintenance department’s budget for the current quarter (just ending) is$200,000. Its use of materials, and their respective prices, are shown below. You require an all-item price index for materials for the next quarter, using the current quarter as a base and the current quantities as weights. Complete the table by filling in the appropriate numerical value in the spaces indicated by the letters.
• Calculate the required index, using the formula $100\times \left(\frac{\Sigma wP_1}{\Sigma wP_0}\right)$ giving your answer to one dp.
• If the price index ($100\times \left(\frac{\Sigma wP_1}{\Sigma wP_0}\right)$) calculated was 104, estimate the budget for the next quarter, giving your answer to the nearest $\$000$. You are assisting with the work on a maintenance department’s budget for the next quarter of 2000. The maintenance department’s budget for the current quarter (just ending) is$\$200,000$. Its use of materials, and their respective prices, are shown below.
• If a price index is 104, which of the following statements is/are correct about average prices?
• Which of the following statements about the base time is/are correct?

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