Free Index Numbers and Time Series MCQs with Answers

• A. Simple average of relatives
• B. Average of weights
• C. Weighted average of relatives
• D. All of above

Explanation: The household budget method calculates CPI as a weighted average of price relatives, with household expenditure shares serving as weights. A simple average of relatives gives equal importance to all items and is therefore a different method.

• A. Household price index
• B. Retail price index
• C. Both a and b
• D. None of these

Explanation: CPI is commonly called the retail price index because it measures changes in prices paid by consumers, and it may also be described as a household price index. Terminology varies by country, but both listed descriptions are used in this context.

• A. Quantity index number
• B. Price index number
• C. Value index number
• D. None of these

Explanation: Price index numbers are most widely used because they measure changes in the general price level and inflation. Quantity and value indices are useful, but they are less commonly used for this broad purpose.

• A. Place
• B. Yearly
• C. Time
• D. None

Explanation: A time series arranges observations in chronological order, such as daily, monthly, or yearly values. Yearly data are only one possible form of a time series, so time is the broader answer.

• A. Regards the base year quantities as fixed
• B. Regards the base year price as fixed
• C. Regards the current year quantities as fixed
• D. non of these

Explanation: The Laspeyres index uses base-year quantities as weights while comparing prices between periods. It therefore keeps the consumption basket fixed at the base-year composition.

• A. To measure changes in quantity
• B. To measure changes in price
• C. To measure changes in a variable over time
• D. To measure changes in demand

Explanation: An index number expresses the relative change in a variable, or group of variables, over time using a reference period. Prices and quantities are common examples, but the broader definition is option c.

• A. Taking A.M. of Laspeyre's and Paasche's index
• B. Taking G.M. of Laspeyre's and Paasche's index
• C. Both (a) and (b)
• D. None of these

Explanation: Fisher's ideal index is the geometric mean of the Laspeyres and Paasche indices: √(L × P). The arithmetic mean is not Fisher's formula.

• A. Laspeyre's index
• B. Paasche's index
• C. Fisher's index
• D. None of these

Explanation: Laspeyres uses base-year quantities, q₀, as weights, so it measures the cost of the base-period basket at current prices. Paasche instead uses current-year quantities as weights.

• A. ∑pn(Po + Pn)/ ∑pn (Po + Pn)
• B. ∑qn(qo + qn)/∑qn(po + pn) x100
• C. ∑pn(qo + qn)/∑pn
• D. ∑qn(Po + Pn)/ ∑qo (Po + Pn) x100

Explanation: The Marshall-Edgeworth volume index uses the average of base- and current-period prices as weights: Σqₙ(p₀+pₙ) divided by Σq₀(p₀+pₙ), multiplied by 100. This corresponds to option d.

• A. Wholesale
• B. Relatives
• C. commodities
• D. Time series

Explanation: Seasonal and cyclical movements are types of variation studied in time series. Index numbers can help reveal these movements after comparisons across periods are made.