1. Q: What is an index number?
A) A statistical measure that tracks changes in a variable over time
B) A measure of central tendency
C) A measure of dispersion
D) A graphical representation of data
Answer: A
2. Q: What is the primary purpose of index numbers?
A) To compare changes in a variable over time
B) To calculate averages
C) To measure dispersion
D) To visualize data
Answer: A
3. Q: What are the main types of index numbers?
A) Price index, quantity index, value index
B) Mean, median, mode
C) Range, variance, standard deviation
D) Time series, cross-sectional
Answer: A
4. Q: What is a price index?
A) A measure of changes in prices over time
B) A measure of changes in quantities over time
C) A measure of changes in values over time
D) A measure of inflation
Answer: A
5. Q: What are some common uses of index numbers?
A) Measuring inflation, tracking economic growth, adjusting salaries
B) Calculating averages, measuring dispersion
C) Visualizing data, identifying trends
D) Forecasting future values
Answer: A
6. Q: How are index numbers used in economics?
A) To track economic indicators, measure inflation, and adjust for price
changes
B) To calculate GDP, measure unemployment
C) To forecast future economic trends
D) To analyze financial markets
Answer: A
7. Q: What is the formula for calculating a simple price index?
A) (Current price / Base price) x 100
B) (Current quantity / Base quantity) x 100
C) (Current value / Base value) x 100
D) (Current price / Current quantity) x 100
Answer: A
8. Q: What is the purpose of weighting in index numbers?
A) To give more importance to certain items or sectors
B) To reduce the impact of outliers
C) To increase the accuracy of the index
D) To simplify the calculation
Answer: A
9. Q: What are some common index numbers used in economics?
A) Consumer Price Index (CPI), Producer Price Index (PPI)
B) Gross Domestic Product (GDP), Unemployment Rate
C) Stock market indices, such as S&P 500
D) All of the above
Answer: D
10. Q: How are index numbers used in policy-making?
A) To inform monetary and fiscal policy decisions
B) To evaluate the effectiveness of policies
C) To forecast future economic trends
D) All of the above
Answer: D
11. Q: What are the main methods of constructing index numbers?
A) Laspeyres method, Paasche method, Fisher's ideal method
B) Mean, median, mode
C) Range, variance, standard deviation
D) Time series, cross-sectional
Answer: A
12. Q: What is the Laspeyres method of constructing index numbers?
A) A method that uses base year quantities as weights
B) A method that uses current year quantities as weights
C) A method that uses average quantities as weights
D) A method that uses prices as weights
Answer: A
13. Q: What is the formula for the Laspeyres price index?
A) Σ(P1Q0) / Σ(P0Q0) x 100
B) Σ(P1Q1) / Σ(P0Q1) x 100
C) Σ(P1Q1) / Σ(P0Q0) x 100
D) Σ(P0Q1) / Σ(P0Q0) x 100
Answer: A
14. Q: What is the Paasche method of constructing index numbers?
A) A method that uses current year quantities as weights
B) A method that uses base year quantities as weights
C) A method that uses average quantities as weights
D) A method that uses prices as weights
Answer: A
15. Q: What is the formula for the Paasche price index?
A) Σ(P1Q1) / Σ(P0Q1) x 100
B) Σ(P1Q0) / Σ(P0Q0) x 100
C) Σ(P1Q1) / Σ(P0Q0) x 100
D) Σ(P0Q1) / Σ(P0Q0) x 100
Answer: A
16. Q: What is Fisher's ideal method of constructing index numbers?
A) A method that uses the geometric mean of Laspeyres and Paasche indices
B) A method that uses the arithmetic mean of Laspeyres and Paasche indices
C) A method that uses the harmonic mean of Laspeyres and Paasche indices
D) A method that uses the median of Laspeyres and Paasche indices
Answer: A
17. Q: What is the formula for Fisher's ideal price index?
A) √(Laspeyres index x Paasche index)
B) (Laspeyres index + Paasche index) / 2
C) (Laspeyres index x Paasche index) / 2
D) √(Laspeyres index + Paasche index)
Answer: A
18. Q: What are the advantages of using the Laspeyres method?
A) It is easy to calculate and understand
B) It takes into account changes in quantities
C) It is suitable for short-term comparisons
D) All of the above
Answer: A
19. Q: What are the disadvantages of using the Paasche method?
A) It requires current year quantity data, which may not be readily available
B) It is sensitive to changes in quantities
C) It is difficult to calculate
D) All of the above
Answer: A
20. Q: When is Fisher's ideal method preferred?
A) When the Laspeyres and Paasche indices differ significantly
B) When the data is readily available
C) When the index is used for short-term comparisons
D) When the index is used for long-term comparisons
Answer: A
21. Q: What is Kelly's method used for?
A) Constructing index numbers
B) Calculating averages
C) Measuring dispersion
D) Visualizing data
Answer: A
22. Q: What type of index number is constructed using Kelly's method?
A) Weighted index number
B) Unweighted index number
C) Price index number
D) Quantity index number
Answer: A
23. Q: What is the formula for Kelly's method?
A) Σ(P1Q0) / Σ(P0Q0) x 100
B) Σ(P1Q1) / Σ(P0Q1) x 100
C) Σ(P1(Q0+Q1)/2) / Σ(P0(Q0+Q1)/2) x 100
D) Σ(P1Q0) / Σ(P0Q1) x 100
Answer: C
24. Q: How are weights calculated in Kelly's method?
A) Using base year quantities
B) Using current year quantities
C) Using average of base year and current year quantities
D) Using prices
Answer: C
25. Q: What is an advantage of Kelly's method?
A) It takes into account changes in quantities over time
B) It is easy to calculate
C) It is suitable for short-term comparisons
D) All of the above
Answer: A
26. Q: What is a limitation of Kelly's method?
A) It requires data on both base year and current year quantities
B) It is sensitive to extreme values
C) It is difficult to calculate
D) All of the above
Answer: A
27. Q: How does Kelly's method differ from Laspeyres method?
A) It uses average of base year and current year quantities as weights
B) It uses base year quantities as weights
C) It uses current year quantities as weights
D) It uses prices as weights
Answer: A
28. Q: How does Kelly's method differ from Paasche method?
A) It uses average of base year and current year quantities as weights
B) It uses current year quantities as weights
C) It uses base year quantities as weights
D) It uses prices as weights
Answer: A
29. Q: What is the time reversal test in index numbers?
A) A test that checks if an index number formula works both forward and
backward in time
B) A test that checks if an index number formula is consistent across
different data sets
C) A test that checks if an index number formula is sensitive to changes in
weights
D) A test that checks if an index number formula is easy to calculate
Answer: A
30. Q: What does the time reversal test check for?
A) If the index number formula gives consistent results when the base and
current year are interchanged
B) If the index number formula gives consistent results across different data
sets
C) If the index number formula is sensitive to changes in weights
D) If the index number formula is easy to calculate
Answer: A
31. Q: What is the factor reversal test in index numbers?
A) A test that checks if an index number formula can be used to calculate
both price and quantity indices
B) A test that checks if an index number formula is consistent across
different data sets
C) A test that checks if an index number formula is sensitive to changes in
weights
D) A test that checks if an index number formula is easy to calculate
Answer: A
31. Q: What does the factor reversal test check for?
A) If the product of the price index and quantity index equals the value index
B) If the index number formula gives consistent results across different data
sets
C) If the index number formula is sensitive to changes in weights
D) If the index number formula is easy to calculate
Answer: A
32. Q: What is the circular test in index numbers?
A) A test that checks if an index number formula gives consistent results
when comparing three or more periods
B) A test that checks if an index number formula is consistent across
different data sets
C) A test that checks if an index number formula is sensitive to changes in
weights
D) A test that checks if an index number formula is easy to calculate
Answer: A
33. Q: What does the circular test check for?
A) If the index number formula gives consistent results when comparing
three or more periods in a circular manner
B) If the index number formula gives consistent results across different data
sets
C) If the index number formula is sensitive to changes in weights
D) If the index number formula is easy to calculate
Answer: A
34. Q: Which index number formula satisfies the time reversal test?
A) Fisher's ideal index
B) Laspeyres index
C) Paasche index
D) None of the above
Answer: A
35. Q: Which index number formula satisfies the factor reversal test?
A) Fisher's ideal index
B) Laspeyres index
C) Paasche index
D) None of the above
Answer: A
36. Q: What does the Wholesale Price Index (WPI) measure?
A) Changes in prices of goods at the wholesale level
B) Changes in prices of goods at the retail level
C) Changes in the cost of living
D) Changes in the GDP
Answer: A
37. Q: What is the primary use of WPI?
A) To measure inflation at the wholesale level
B) To measure inflation at the retail level
C) To calculate the cost of living
D) To estimate GDP
Answer: A
38. Q: What does the Consumer Price Index (CPI) measure?
A) Changes in prices of goods and services consumed by households
B) Changes in prices of goods at the wholesale level
C) Changes in the cost of production
D) Changes in the GDP
Answer: A
39. Q: What is the primary use of CPI?
A) To measure inflation at the retail level
B) To measure inflation at the wholesale level
C) To calculate the cost of living
D) To estimate GDP
Answer: A
40. Q: What is the main difference between WPI and CPI?
A) WPI measures prices at the wholesale level, while CPI measures prices at
the retail level
B) WPI measures prices of goods, while CPI measures prices of services
C) WPI is used for macroeconomic analysis, while CPI is used for
microeconomic analysis
D) WPI is used for international trade, while CPI is used for domestic trade
Answer: A
41. Q: Why is CPI considered a more relevant measure of inflation for
households?
A) Because it reflects the actual prices paid by consumers
B) Because it includes prices of goods and services
C) Because it is used for macroeconomic analysis
D) Because it is used for international trade
Answer: A
42. Q: How is CPI calculated?
A) By tracking changes in prices of a basket of goods and services
B) By tracking changes in prices of goods at the wholesale level
C) By calculating the average price level
D) By estimating the GDP Answer: A
43. Q: What are some common uses of CPI?
A) Indexing wages and pensions, adjusting prices
B) Calculating GDP, estimating economic growth
C) Analyzing international trade, forecasting exchange rates
D) All of the above
Answer: A
44. Q: What are some limitations of WPI?
A) It does not reflect prices paid by consumers
B) It is not widely available
C) It is not used for macroeconomic analysis
D) All of the above
Answer: A
45. Q: What are some limitations of CPI?
A) It may not reflect the actual inflation experience of all households
B) It is not widely available
C) It is not used for macroeconomic analysis
D) All of the above
Answer: A
46. Q: What is deflating an index number?
A) Adjusting an index number for changes in prices
B) Adjusting an index number for changes in quantities
C) Calculating the average value of an index number
D) Forecasting future values of an index number
Answer: A
47. Q: Why is deflating an index number important?
A) To remove the effect of price changes and show real changes in value
B) To calculate the average value of an index number
C) To forecast future values of an index number
D) To compare different index numbers
Answer: A
48. Q: What are some common methods of deflating index numbers?
A) Using a price index, such as CPI or WPI
B) Using a quantity index
C) Using a value index
D) Using a regression analysis
Answer: A
49. Q: How is deflation done using a price index?
A) By dividing the current value by the price index
B) By multiplying the current value by the price index
C) By adding the price index to the current value
D) By subtracting the price index from the current value
Answer: A
50.Q: What is the purpose of deflating economic data?
A) To show real changes in value, unaffected by price changes
B) To calculate the average value of economic data
C) To forecast future economic trends
D) To compare different economic indicators
Answer: A
51. Q: How is deflated data used in economic analysis?
A) To analyze real changes in economic variables, such as GDP or income
B) To calculate the average value of economic variables
C) To forecast future economic trends
D) To compare different economic indicators
Answer: A
51. Q: What is the difference between nominal and real values?
A) Nominal values are not adjusted for price changes, while real values are
adjusted for price changes
B) Nominal values are adjusted for price changes, while real values are not
adjusted
C) Nominal values are used for short-term analysis, while real values are
used for long-term analysis
D) Nominal values are used for macroeconomic analysis, while real values
are used for microeconomic analysis
Answer: A
52. Q: Why is it important to use real values in economic analysis?
A) Because they show the actual changes in economic variables, unaffected
by price changes
B) Because they are easier to calculate
C) Because they are more accurate than nominal values
D) Because they are required by law
Answer: A
53. Q: What is business forecasting?
A) The process of predicting future business trends and outcomes
B) The process of analyzing past business performance
C) The process of setting business goals and objectives
D) The process of making business decisions
Answer: A
54. Q: Why is business forecasting important?
A) To make informed decisions about future business operations
B) To analyze past business performance
C) To set business goals and objectives
D) To reduce costs and increase efficiency
Answer: A
55. Q: What are some common methods of business forecasting?
A) Qualitative methods, quantitative methods, and time series analysis
B) Regression analysis, econometric models, and survey research
C) Exponential smoothing, moving averages, and decomposition
D) All of the above
Answer: D
56. Q: What is the difference between qualitative and quantitative
forecasting methods?
A) Qualitative methods use subjective judgment, while quantitative methods
use numerical data
B) Qualitative methods use numerical data, while quantitative methods use
subjective judgment
C) Qualitative methods are used for short-term forecasting, while
quantitative methods are used for long-term forecasting
D) Qualitative methods are used for macroeconomic forecasting, while
quantitative methods are used for microeconomic forecasting
Answer: A
57. Q: What is time series analysis in business forecasting?
A) A method of analyzing historical data to identify patterns and trends
B) A method of forecasting future values based on past data
C) A method of analyzing the relationship between different variables
D) A method of evaluating the accuracy of forecasting models
Answer: A
58. Q: What are some common techniques used in time series analysis?
A) Moving averages, exponential smoothing, and decomposition
B) Regression analysis, econometric models, and survey research
C) Qualitative methods, such as expert opinion and Delphi method
D) All of the above
Answer: A
59. Q: What is the purpose of forecasting in business decision-making?
A) To make informed decisions about future business operations
B) To analyze past business performance
C) To set business goals and objectives
D) To reduce costs and increase efficiency
Answer: A
60. Q: What are some common applications of business forecasting?
A) Sales forecasting, demand forecasting, and financial forecasting
B) Production planning, inventory management, and supply chain
management
C) Marketing strategy, product development, and pricing
D) All of the above
Answer: D
