Free Index Numbers MCQs with Answers
30 Index Numbers MCQs from Quantitative Methods, each with the correct answer and a written explanation of why it is correct. Free and unlimited, with no account needed.
Index numbers measure relative changes in prices, quantities or values over time using a base period. Work includes simple and weighted price indices, aggregate methods, consumer price calculations, percentage change and purchasing power, with attention to choosing a base year and interpreting an index rather than treating it as an absolute amount.
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- A. Σp1q1 ÷ Σp0q0 × 100
- B. Σp1q0 ÷ Σp0q0 × 100
- C. Σp1q1 ÷ Σp1q0 × 100
- D. Σp0q1 ÷ Σp0q0 × 100
Explanation: Laspeyres' price index compares current prices with base-period quantities held constant.
Correct answer: Σp1q0 ÷ Σp0q0 × 100- A. 115.00
- B. 120.00
- C. 123.33
- D. 125.00
Explanation: The index is calculated as (12 + 25) ÷ (10 + 20) × 100, which equals 123.33.
Correct answer: 123.33- A. 80
- B. 100
- C. 120
- D. 125
Explanation: The price relative is current price divided by base price, multiplied by 100.
Correct answer: 125- A. 132
- B. 136
- C. 138
- D. 142
Explanation: The weighted average is (120 × 4 + 150 × 6) ÷ (4 + 6) = 138. The larger weight assigned to the second commodity pulls the result closer to…
Correct answer: 138- A. Rs. 38,000
- B. Rs. 42,500
- C. Rs. 40,000
- D. Rs. 45,000
Explanation: Real income equals money income divided by the price index expressed as a ratio: 50,000 ÷ 1.25 = Rs. 40,000.
Correct answer: Rs. 40,000- A. 120.00
- B. 125.00
- C. 128.57
- D. 132.50
Explanation: Using base quantities, the numerator is (5 × 10) + (8 × 5) = 90 and the denominator is (4 × 10) + (6 × 5) = 70.
Correct answer: 128.57- A. Current-period quantities
- B. Base-period quantities
- C. Average-period quantities
- D. Fixed standard quantities
Explanation: Paasche's price index uses current-period quantities as weights while comparing current and base prices.
Correct answer: Current-period quantities- A. Current prices and base quantities
- B. Current prices and current quantities
- C. Base prices and current quantities
- D. Base prices and base quantities
Explanation: A value index compares total current-period value with total base-period value, so each value uses the prices and quantities of its own…
Correct answer: Current prices and current quantities- A. Unit and circular tests
- B. Fixed base and chain tests
- C. Time reversal and factor reversal tests
- D. Trend and proportionality tests
Explanation: Fisher's ideal index satisfies both the time reversal test and the factor reversal test.
Correct answer: Time reversal and factor reversal tests- A. 120.00
- B. 125.00
- C. 130.00
- D. 135.00
Explanation: To shift the base to 2018, divide the 2020 index by the 2018 index and multiply by 100: 150 ÷ 120 × 100 = 125.
Correct answer: 125.00- A. Relative change over time or place
- B. Absolute change in one variable
- C. Association between two variables
- D. Variation around an average
Explanation: An index number expresses the relative change in a variable or group of variables, usually with the base period set equal to 100.
Correct answer: Relative change over time or place- A. An unusually prosperous year
- B. A normal and stable year
- C. An unusually depressed year
- D. The latest available year
Explanation: A normal and stable year provides a representative basis for comparison.
Correct answer: A normal and stable year- A. Base-period prices
- B. Average-period prices
- C. Current-period prices
- D. Base-period quantities
Explanation: Paasche's quantity index uses current-period prices as weights when comparing quantities.
Correct answer: Current-period prices- A. The original base year
- B. The final year in the series
- C. The average of all years
- D. The immediately preceding year
Explanation: The chain-base method links successive short-term relatives, so each year is compared with the preceding year.
Correct answer: The immediately preceding year- A. Use no reference period
- B. Always produce a value below 100
- C. Prevent comparison with the base year
- D. Become less representative over time
Explanation: Consumer habits, technology and available products may change, making an old fixed basket less representative.
Correct answer: Become less representative over time- A. Expenditure shares of families
- B. Physical quantities produced
- C. Profits earned by retailers
- D. Tax rates on commodities
Explanation: The family-budget method assigns weights according to the relative expenditure of households on different groups of goods and services.
Correct answer: Expenditure shares of families- A. Increase in the same proportion
- B. Remain fixed at the base value
- C. Decrease in the same proportion
- D. Become equal to the price index
Explanation: Purchasing power moves inversely with the price level. When prices rise, the same monetary unit buys fewer goods and services, so its…
Correct answer: Decrease in the same proportion- A. To calculate the number of observations
- B. To convert real values into nominal values
- C. To remove seasonal variation only
- D. To convert nominal values into real values
Explanation: Deflation removes the effect of general price changes so that values from different periods can be compared in real terms.
Correct answer: To convert nominal values into real values- A. The average of base and current quantities
- B. Only current-period quantities
- C. Only base-period quantities
- D. The difference between the two quantities
Explanation: The Marshall-Edgeworth index weights prices by the sum or average of base-period and current-period quantities.
Correct answer: The average of base and current quantities- A. Its price and quantity indexes should be equal
- B. Its two time directions should give reciprocal results
- C. Its index should remain below 100
- D. Its base-year quantities should remain unchanged
Explanation: The time-reversal test requires that reversing the base and current periods produces reciprocal index values, subject to the chosen scale.
Correct answer: Its two time directions should give reciprocal resultsIndex Numbers MCQs: common questions
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