PRC-2 · Chapter 9 · Question 42 of 60
What is considered a massive, practical advantage of utilizing a Chained Index over a Fixed Base Index?
Test yourself: pick an answer
Reveal answer & explanation
Correct answer: B) It allows for obsolete items to be easily dropped and new commodities to be seamlessly introduced into the basket each year.
Explanation
Because a chained index only compares the current year to the immediately preceding year, the consumer basket can be updated annually, making it highly responsive to new products (like smartphones replacing landlines).
More Indices MCQs
- Q44In the standard mathematical notation for index construction, what does the expression 'pn * q0' explicitly dictate?
- Q45If an official government price index rises from 100 in 2015 to 142 in 2024, what is the precise interpretation of this data?
- Q46What is the standard formula utilized to calculate a 'Simple Price Relative' for a single, isolated commodity?
- Q47In the construction of a Laspeyres Price Index, what specific data is utilized as the fixed mathematical weighting factor?
- Q48Conversely, what specific data does the Paasche Price Index utilize as its weighting factor?