4.2.1.3

Question 1

What are index numbers used for?

Answer 1

Expressing economic data and comparing information. Index numbers simplify the comparison of different economic indicators over time.

Question 2

What is an index number?

Answer 2

A figure reflecting the price or quantity compared with a base value. It provides a relative measure of change in economic data.

Question 3

What is the index number always for the base value?

Answer 3

100

Question 4

How is an index number calculated?

Answer 4

(Data value / Base year value) * 100. This formula allows for the calculation of index numbers relative to a base year.

Question 5

List some examples of economic data expressed in index number format.

Answer 5

• FTSE-100 share index
• CPI
• Exchange rate index
• Index of house prices
• Index of property rents
• Index of GDP
• Index of GNI
• HDI
• Index in production in manufacturing

Question 6

What does CPI stand for?

Answer 6

Consumer Price Index. CPI is the main measure of inflation in the UK.

Question 7

What process is used to create the CPI?

Answer 7

A family expenditure survey is conducted and a representative basket of over 600 goods and services is used. Weights are assigned based on the importance of each item in the basket.

Question 8

How many price quotations are collected monthly for the CPI in the UK?

Answer 8

120,000. These quotations are gathered from 141 locations covering 600 products.

Question 9

What is the inflation rate calculation process using weighted price changes?

Answer 9

Sum of the indices * weight divided by the sum of the weights. This results in an overall inflation figure based on weighted contributions of various goods.

Question 10

True or False: Index numbers have units.

Answer 10

False. Index numbers do not have units, they are relative measures.

Question 11

Fill in the blank: The base year value is set to _______.

Answer 11

100