Question 1

What is an index number often called?

Accepted Answer

An index number is often called the barometer of economic activity because it measures the changes in the economic condition of a country over time, similar to how a barometer measures atmospheric pressure.

Question 2

Which index number uses base year quantities as weights?

Accepted Answer

Laspeyres' index number uses base year quantities (q0) as weights for calculating the weighted average of prices.

Question 3

Which index number is considered as an ideal index number?

Accepted Answer

Fisher's index number is considered as the ideal index number because it satisfies both the time reversal test and the factor reversal test, and it uses both base and current year quantities.

Question 4

In constructing a consumer price index, which of the following is generally used?

Accepted Answer

Family budget method or weighted average of price relative method is generally used for constructing the consumer price index.

Question 5

The base year index is always taken as:

Accepted Answer

The index number for the base year is always taken as 100, which acts as a standard point of comparison for other years.

Index Numbers