PRC-2 · Chapter 9 · Question 1 of 60
Which of the following best describes the fundamental purpose of constructing economic index numbers?
Test yourself: pick an answer
Reveal answer & explanation
Correct answer: B) To measure relative changes in the magnitude of variables, like prices or quantities, over time.
Explanation
Index numbers are specialized statistical tools designed strictly to measure relative changes in the level of a phenomenon (like prices, wages, or production volumes) with respect to time or geographical location.
More Indices MCQs
- Q3Which standard mathematical formula is used to calculate a 'Simple Price Relative' for a single commodity?
- Q4In the Laspeyres Price Index formula, what specific values are used to weight the prices of the commodities?
- Q5Which characteristic is a primary limitation of using the Paasche Price Index in practice?
- Q6Fisher’s Ideal Index is technically defined as the:
- Q7How is the 'purchasing power of money' mathematically related to a general price index like the Consumer Price Index (CPI)?