Chapter 9- Index Numbers

Question 1

What are Index Numbers?

Answer 1

Provide a standardised way of comparing values over time.

Question 2

What is the difference between the chain based and fixed base rule?

Answer 2

chain - denominator changes

fixed- denominator remains the same

Question 3

Price indices and quantity indices

Answer 3

measuring the change in the monetary value of a group of items overtime is called price indices

measuring the change in value in non-monetary values of a group of items overtime is called quantity indices

Question 4

What does the consumer prices index (CPI) show?

Answer 4

change in the average baskets of goods and services

measures percentage changes, month by month, in the average level of prices of a representative basket of goods

Question 5

How do you calculate the annual rate of inflation?

Answer 5

(current yr / previous yr ) x 100

ANS - very first year shown

Question 6

What is base-weighted price indices?

Answer 6

the change in price of a basket of goods where we weight the price rises by the quantities purchased at the start of the period (base yr)