PRC-2 · Chapter 9 · Question 24 of 60
In general index construction, what is the most significant disadvantage of using the Simple Aggregate Method?
Test yourself: pick an answer
Reveal answer & explanation
Correct answer: B) It is heavily skewed by commodities with naturally large numerical unit prices, ignoring their actual economic importance.
Explanation
Simple aggregations only sum up raw prices, meaning a highly-priced but rarely used item will improperly dominate the index compared to cheap essentials.
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