CHAPTER 09 INDICES

LO1. INDEX NUMBERS

Index numbers are measure that designed to show changes in a variable or group of related
variables with respect to time e.g. income, inflation etc.
(i) Price Index Numbers: It measures the relative changes in the price of commodity
between two time periods.
(ii) Quantity Index Numbers: It measures relative changes in the physical quantity of good
produced, consumed or sold for an item or group of items.
1.1 Simple Index Number
It measure percentage change in single variable with respect to a base.
1.2 Composite Index Number
It measures an average percentage change in a group of relative variables with respect to
a base.
LO2. SIMPLE PRICE INDEX OR PRICE RELATIVE:
2.1 Fix Base Method:
Pn
Pon = × 100
Po
Qn
Qon = × 100
Qo
Example
Years Price
2018 30
2019 45
2020 55
2021 100
2.2 Chain Base Method:
P
 Link Relative = P n × 100
n−1
Relative index of current year ×Chain Index of previous year
 Chain Index = 100
Example:
Years Price
20x5 100
20x6 110
20x7 120
20x8 130
20x9 160

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MULTIPLE CHOICE QUESTIONS RELATED TO ABOVE TOPIC

Q.1. Which of the following are uses of index numbers?
(1) It can help in determining purchasing powers and real income.
(2) It can help in exploring trends prevailing at the market.
(3) It can be used to get feel of the economic tendencies, inflation and deflation.
(a) 1 and 2 (b) 1 and 3
(c) 2 and 3 (d) All of the above
Q.2 The following data represents the price of a product over a period of two years:
Price
2022 200
2023 250
Considering 2022 as base year calculate simple price index for 2023.
(a) 105 (b) 115
(c) 125 (d) None of the above
Q.3 Indices are calculated with reference to a number which is usually given a value of 100 or 1,000
(a) Base (b) Chain
(c) Odd (d) Even
Q.4. Index numbers calculated for the price of a particular product assuming 2021 as base year are as
under:
2021 100
2022 110
2023 126
What is the percentage price increase between 2022 and 2023?
(a) 14.55% (b) 13.55%
(c) 15.55% (d) 14%
Q.5 A _______ index is an index number in which the value of any given period is related to the
value of its immediately preceding period.
(a) Chain (b) Base
(c) Linked (d) None of the above
Q.6 A _________ base index is an index number in which the value of any given period is related to
the value in the initial time period and this base remains unchanged throughout the index.
(a) Chain (b) Linked
(c) Fixed (d) None of the above
Q.7 Index numbers assuming 2019 as base year are as under:
2019 100
2020 105
2021 109
2022 115
<
2023 140
Calculate the index for 2022 on Chain base Method:
(a) 105.5 (b) 106
(c) 121.74 (d) 103.81

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Q.8. Consider following data:

Year Index
2020 90
2021 100
2022 110
2023 120
The data suggests that base year
(a) 2020 (b) 2021
(c) 2022 (d) 2023
Q.9. Index Numbers assuming 2019 as base year are as under:
2019 100
2020 110
2021 125
2022 145
2023 150
Calculate the index for each year on Chain Base Method.
(a) 100, 110, 113.62, 116, 103.51 (b) N/A, 110, 113.64, 116, 103.45
(c) 100, 110, 113.64, 116, 103.41 (d) 100, 110, 113.64, 116, 103.45
Q.10. The price relatives of three commodities are given below:
Year A B C
2013 100 105 102
2014 106 100 100
The chain indices for each commodity are:
(a) 94, 105 and 102 respectively (b) 106, 95 and 98 respectively
(c) 106, 105 and 102 respectively (d) 106, 95 and 102 respectively
Q.11.
Year Price (Rs.)
20X7 3700
20X8 4500
20X9 4800
20Y0 5000
20Y1 5300
Keeping 20X7 as base year, simple index numbers relative to price for the given period would be:
(a) 100, 121.62, 129.73, 135.14, 143.24 (b) 121.62, 100, 93.75, 90, 84.91
(c) 100, 82.22, 77.08, 74, 69.81 (d) 82.22, 100, 106.67, 111.11, 117.78
Q.12. Find Chain indices for 2018?
Years Kerosene Petrol Diesel
2017 304 102 100
2018 100 100 105
(a) 100 (b) 78.66
(c) 88.25 (d) 95.226

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Q.13. Comparison year is called ………

(a) Current year (b) Base year
(c) Both a & b (d) None of these
Q.14. The price of commodity in different years is given below: compute the chain indices for the
following years.
Years 2010 2011 2012 2013
Price 49 53 58 62
Determine the chain indices in the above case:
(a) 100, 115.50, 118.40, 112.80 (b) 100, 92.50,91.40,93.55
(c) 100, 108.16, 109.43, 106.90 (d) 100, 105.50, 116.50, 114.50
Q.15. The equation 1990 = 100 indicates that the index numbers are calculated using:
(a) Base year 1990 (b) Current year 1990
(c) Previous year 1990 (d) None of these

LO3. COMPOSITE PRICE INDEX:

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CHAPTER 09 INDICES

3.1 Finding Index by Simple Aggregate Method:

∑ Pn
Pon = × 100
∑ Po

Years Price of A Price of B Price of C

2020(Base) 10 5 6
2021 10 6 12
3.2 Finding Index by Simple Average Method:
P
∑ ( n × 100)
Po
Pon =
n

Years Price of A Price of B Price of C

2020(Base) 10 5 6
2021 10 6 12
Note: Convert Pn to Qn and Po to Q0 if quantity index is required. (N = 3)
3.3 Laspeyre’s Index:
 It is based on base year
∑P Q
 Pon = ∑ PnQ 0 × 100
0 0
∑Q P
 Qon = ∑ P nQ0 × 100
0 0
 It is also called based year weighted index
 Only price information is required in current year
 Overstate inflation
 The Laspeyre price index measures price changes with reference to the quantities
of goods in the basket at the date that the index was first established
3.4 Paasche’s Index:
 It is based on current year
∑P Q
 Pon = ∑ PnQ n × 100
0 n
∑ Qn Pn
 Qon = ∑ Q × 100
0 Pn
 It is also called current year weighted index
 Price and quantity each information is required in current year.
 Understates Inflation
3.5 Fisher’s Index:
 Pon = √𝐿 × 𝑃
 Qon = √𝐿 × 𝑃
Example:
Goods Po Pn Qo Qn
A 5 7 10 15
B 10 15 5 8
C 6 10 20 15
SOLUTION
(156.8%, 111.36%) (153.06%, 108.69%) (154.91%, 110.01%)

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CHAPTER 09 INDICES

3.6 Weighted Average of Price:

∑ WI
Pon =
∑W
 W = P0 Q0
P
 I = Pn × 100
o

Substituting the values in above formula we will get the result that is:
∑ Pn Q0
Pon = × 100
∑ P0 Q0
Example:
Goods Prices W
2021 2022
A 4 9 10
B 6 11 15
C 10 9 15
MULTIPLE CHOICE QUESTIONS RELATED TO ABOVE TOPIC
Q.16. The following data represents the price of a product over a number of years:
Price
2020 200
2021 250
2022 270
2023 300
Compute percentage price increase between 2020 and 2023.
(a) 25% (b) 100%
(c) 50% (d) 30%
Q.16. Fishers index is said to be ________ mean of Paasche and Laspeyre index
(a) Harmonic (b) Arithmetic
(c) Geometric (d) None of the above
Q.17. In order to calculate Laspeyre quantity index we need as weights:
(a) Base year prices (b) Current year prices
(c) Prices of a future year (d) None of the above
Q.18. Calculate Paasche's quantity index if:
(1) Ʃ(P1 × Q1) = 250
(2) Ʃ(P1 × Qo) = 200
(a) 105 (b) 115
(c) 125 (d) 135
Q.19. Calculate Laspeyre price index if:
(1) Ʃ (P1 x Qo) = 300
(2) Ʃ (Po x Qo) = 200
(a) 125 (b) 150
(c) 175 (d) 200

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Q.20. Fisher index number =

(a) Geometric mean of (Laspeyre index x Paasche index)
(b) Geometric mean of (Laspeyre index / Paasche index)
(c) Geometric mean of (Laspeyre index x 250)
(d) None of the above
Q.21. Calculate simple aggregate price index for the year 2023 for following data considering 2022 as
base year
Product Prices in Prices in
2022 2023
A 50 55
B 60 64
C 70 79
(a) 105 (b) 110
(c) 115 (d) 120
Q.22. If Laspeyre index is same and equal to Paasche index then Fisher index will:
(a) Also be same and equal to Laspeyre index
(b) Not be same and less than Laspeyre index
(c) Be twice of the Laspeyre index
(d) Be thrice of the Laspeyre index
Q.23. If Laspeyre index is 120 and Paasche index is twice Laspeyre index then Fisher index will be:
(a) 139.71 (b) 149.71
(c) 159.71 (d) 169.71
Q.24. Fishers index is also known as:
(a) Ideal index (b) Real index
(c) Trusted index (d) None of the above
Q.25. Which of the following is / are correct?
(1) Sometimes an index is adjusted to change its base year.
(2) Base year of index is never changed.
(3) Fisher index is known as ideal index.
(a) 1 and 2 (b) 1 and 3
(c) 2 and 3 (d) All are correct
Q.26. The __________ index fails to account for the fact that people will buy less of those items which
have risen in price more than others. These are retained in the index with the same weighting
even though the volume of consumption has fallen.
(a) Paasche (b) Laspeyre
(c) Fisher (d) Marshal
Q.27. The ________ index is based on the most recent quantities purchased. This means that it has a
focus which is biased to the cheaper items bought by consumers as a result of inflation.
(a) Paasche (b) Laspeyre
(c) Fisher (d) Marshal

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Q.28. Which of the following statements is correct about Laspeyre price index?
(a) It fails to account for the fact that people will buy less of those items which have
risen in price
(b) The denominator in the Laspeyre price index has to be recalculated every year to take
account of the most recent quantities consumed.
(c) It is based on most recent quantities purchased.
(d) It tends to understate inflation
Q.29. A laspeyre price index of 90 shows that prices have:
(a) increased by 10% if same quantity of goods are bought this year as base year
(b) increased by 90% if same quantity of goods are bought this year as base year
(c) decreased by 10% if same quantity of goods are bought this year as base year
(d) decreased by 90% if same quantity of goods are bought this year as base year
Q.30. Calculate Fisher’s Price Index for the year 2011.
Commodities Price (Rs) Quantity (kg)
2010 2011 2012 2010 2011
Alpha 64 75 80 270 276
Beta 40 45 41 124 118
Gamma 18 21 20 130 121
Eta 58 68 56 185 267
(a) 105.57 (b) 110.44
(c) 116.57 (d) None of these
Q.31. Which of the following statement is/are correct:
(i) In Laspeyre price index, the denominator does not change from year to year.
(ii) In Paasches price index, the denominator has to be recalculated every year to take
account of the most recent quantities consumed
(a) Both statements are correct (b) Both statements are not correct
(c) Only statement (i) is correct (d) Only statement (ii) is correct
Q.32. Which of the following statements about Laspayer’s Price Index is/are correct?
(i) It tends to overstate inflation.
(ii) The denominator does not change from year to year.
(a) Both statements are correct (b) Both statements are not correct
(c) Only statement (i) is correct (d) Only statement (ii) is correct
Q.33. Which of the following statements about Laspayer’s Price Index is/are correct?
(i) It tends to overstate inflation.
(ii) The denominator change from year to year.
(a) Both statements are correct (b) Both statements are not correct
(c) Only statement (i) is correct (d) Only statement (ii) is correct

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Q.34. Why Laspeyre price indexs is used more than the Paasche price index?
(a) Because quantities of base year has to be collected to construct Paasche index
(b) Because more information has to be collected to construction Laspeyre index
(c) Because less information has to be collected to construct Paasche index
(d) Because more information has to be collected to construct Paasche index
Q.35. Find Laspeyre’s price index number?
2002 price 2000 price 2000 quantity
123 112 50
244 220 40
301 290 35
(a) 109.91 (b) 107.71
(c) 105.71 (d) 108.81
Q.36. Chemical Master Company (CMC) produces a special industrial chemical that is a blend of four
chemical ingredients. The prices at the beginning and the end of year of each material and
quantities required to make one unit of finished product are given below:
Jan 20X2 (Base Period) Dec 20X5 (Current Period)
Ingredients
Price per kg Kg per unit Price per kg Kg per unit
A 0.50 10.00 3.95 11.00
B 8.75 3.00 9.90 2.50
C 0.99 2.00 0.95 3.00
D 4.00 2.00 4.50 5.00
Using Laspeyre price index as at Dec 20X5, which of the following statement is correct?
(a) Price have risen by 30.82% between Jan 20X2 and Dec 20X5
(b) Prices have risen by 23.56% between Jan 20X2 and Dec 20X5
(c) Prices have risen by 22.67% between Jan 20X2 and Dec 20X5
(d) Prices have risen by 29.32% between Jan 20X2 and Dec 20X5
Q.37. In which index, choice of base year is difficult?
(a) Quantity index No. (b) Weighted index No.
(c) Price index No. (d) Simply Qty index No.
Q.38. What is effect of Paasche’s index No. on inflation?
(a) Its understate inflation (b) Neutral
(c) Its overstate inflation (d) No impact
Q.39. What is effect of laspeyre’s index No. on inflation?
(a) Its understate inflation (b) Neutral
(c) Its overstate inflation (d) No impact
Q.40. Laspeyre price index tends to overstate inflation, this is because
(a) Both prices and quantities of current year are used for inflation
(b) Both prices and quantities of base year are used as numerator for inflation
(c) Consumers reacts to price increases (d) All of these
Q.41. Laspeyre price index shows prices of
(a) Base year (b) Current year
(c) Both (d) None of these

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Q.42. Laspeyre price index also called the

(a) Current year quantity weighted method
(b) Base year quantity weighted method
(c) Both
(d) None of these
Q.43. Laspeyre price index what value is to be changed every year.
(a) Price (b) Quantity
(c) Both (d) None of these
Q.44. Which of the following does not change in the calculation of Laspeyre index every year?
(a) Denominator (b) Numerator
(c) Both (d) None of these
Q.45. The only new information that has to be collected each year is the calculation of Laspeyre index
is:
(a) Price of item (b) Quantities of item
(c) Both (d) None of these
Q.46. Laspeyre price index fails to account for the following fact that
(a) People will buy less of those item which have risen in prices more than other
(b) People will buy more of those item which have risen in prices more than others
(c) It is based on quantities bought in current year instead of base year
(d) All of these
Q.47. If the Fisher index is 10% more than the Laspeyre’s index and base year index is 109.5, find
Paasche’s index
(a) 120.5 (b) 115.5
(c) 132.5 (d) 32.5
Q.48. Which of the following statement/s is/are correct about Laspeyre’s price index?
(a) It has a focus which is biased to the cheaper items bought by consumers as a result of
inflation.
(b) The denominator in the Laspeyre price index has to be recalculated every year to take
account of the most recent quantities consumed.
(c) It is based on quantities bought in the base year.
(d) It tends to overstate inflation
Q.49. The weight used in aggregate quantity index are:
(a) Percentage of total quantity (b) Prices
(c) Average of quantities (d) None of these
Q.50. Index numbers are used as the barometers of:
(a) Prices (b) Quantities
(c) Inflation (d) None of these
Q.51. An increase in price index from 120 to 128 means that the prices have increased by_____
(a) 8% (b) 8.667%
(c) 6% (d) 6.667%

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Q.52. The increase in index from 100 to 113 and a price increase from 0.9 to 1.35 in terms of
percentage is:
(a) 13% for both (b) 50% for both
(c) 13% and 50% respectively (d) 50% and 13% respectively
Q.53. _______________ tends to understate inflation.
(a) Laspeyer’s Index Number (b) Paasche’s Index Number
(c) Fisher’s Index Number (d) All of these.
Q.54. If Laspeyer’s Index Number is of 113 and Paasche’s Index Number of 118, then the Fisher’s
Price Index would be
(a) 115.4 (b) 112.34
(c) 154.7 (d) 123.4
Q.55. Assuming there is no change in prices between base year and current year but the quantity
consumed for each type of product has increased by 5 units each. What will be the Laspeyre price
index.
(a) 105 (b) 100
(c) 95 (d) Cannot be determined
Q.56. Assuming there is a 20% rise in prices from base year to current year of each of the products
under consideration. Which of the following will increase by 20% as well?
(a) Laspeyre price index (b) Paasche price index
(c) Fisher price index (d) All of these
Q.57. A machine costs Rs. 5,000 in 2015. The price indices are as follows:
2015 : 45
2021 : 63
How much will the machine cost in 2021?
(a) 8,000 (b) 7,000
(c) 6,000 (d) 10,000
Q.58. Five years ago the price of a particular product was Rs. 5,000 and the relevant index was 90.
Compute the price index now if the price of the product today is Rs. 7,500.
(a) 135 (b) 140
(c) 40 (d) 125
Q.59. In Laspeyre price index number, quantities belonging to base year are taken as weight. Therefore,
sometimes this method is called base year quantity weight method.
Q.60. Fisher price index is a price index, computed for a given period by taking the ______ root of the
product of the Paasche index value and the Laspeyre index value.
(i) Square (ii) cube
Q.61. In the calculation of the ______ price index , the denominator does not change from year to year.
The only information that has to be collected each year is the prices of items in the index
(i) Laspeyre (ii) Paasche
Q.62. The Paasche price index measures ____ changes with reference to current quantities of goods in
the basket.
(i) Price (ii) Quantity

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Q.63. ______price index tends to overstate inflation whereas the _______price index tends to
understate it. This is because consumers react to price increases by changing what they buy.
(i) Laspeyre Paasche
(ii) Paasche Laspeyre
Q.64. If the Fisher index is 10% more than the Laspeyre’s index and base year index is 109.5, find
Paasche’s index.
(a) 115.6 (b) 96.5
(c) 100.51 (d) 132.5
LO4. CONSUMER PRICE INDEX
 It is also called retail price index or cost of living index
 It is a composite price index calculated using any of the following method
∑P Q
4.1 Aggregate Expenditure method: Pon = ∑ PnQ0 × 100
0 0
∑ WI
4.2 Household or Family Budget Method: Pon = ∑W

Purchasing
Price CPI
Power

4.3 Formulae to Remember:

Money Income
 Real Income or Deflated Income = CPI
× 100
1
 Purchasing Power = × 100
CPI
1
 CPI = PP × 100
 Real Income = Income x P.P
Real Income
 P.P = Money Income × 100
Money Income
 C.P.1 = × 100
Real Income
Example:
Real Income of a person in 2012 was 24000 with CPI of 105. If CPI in 2013 is 120 find
his real income in 2013.
Example:
Find Purchasing power in each year.
Year CPI
2021 100
2022 105
2023 112
2024 120

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Example:
Calculate Real Income in each case
Years Income CPI Real Income Status
2020 15000 100 15000/100=15000 Equilibrium
2021 17000 98 17000/98=17346.7 Surplus
2022 20000 106 20000/106=18868 Deficit
2023 26000 122 26000/122=21311 Deficit

Example:
If the current year weighted index is 5% higher than the base year weighted index.
Fischer’s index is 250. Find Laspeyre’s and Paasche’s price index. (243.975, 256.1)
Example:
If Fischer’s index is 10% more than the Laspeyre’s index. If base year weighted index is
109.5. Find Paasche’s index. (132.49)
LO5. RATE OF INFLATION/DEFLATION
CPI2 − CPI1
× 100
CPI1

Inflation
Positive Value

Deflation
Negative Value

Example:
Find Rate of Inflation or Deflation of each of the following years.
Year CPI
20x5 100
20x6 95
20x7 120
20x8 130
20x9 97

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LO6. QUICK FACTS

 Nominal GDP = P0 Q0 or Pn Qn
 Real GDP = P0 Qn
Nominal GDP
 GDP Deflator = Real GDP
× 100
 If GDP Deflator is 115% , It means 15% is Inflation rate.
 GDP is deflator is the broader measure of inflation than CPI.

MULTIPLE CHOICE QUESTIONS RELATED TO ABOVE TOPIC

Q.65. Purchasing power can be calculated as:
(a) 100/consumer price index (b) Consumer price index x 100
(c) Consumer price index / 100 (d) None of the above
Q.66. Real wages can be calculated as:
(a) Purchasing power x nominal wages
(b) Purchasing power / nominal wages
(c) 100 / nominal wages
(d) 100 / purchasing power
Q.67. Purchasing power can be calculated as:
(a) Real wages / nominal wages (b) Nominal wages / real wages
(c) Consumer price index x real wages (d) None of the above
Q.68. _________ are statistical devices that are used to express the relationship between quantitative
variables
(a) Index numbers (b) Real wages
(c) Nominal wages (d) None of the above
Q.69. Consider following data:
2022 2023
Nominal wages 15,000 20,000
Real wages 15,000 16,000
Compute consumer price index for the year 2023
(a) 110 (b) 125
(c) 135 (d) 145
Q.70. Use the following consumer price indices to find purchasing power of Rupee for each year:
Year 2021 2022 2023
CPI 100 115 150
(a) 2021: 1, 2022: 0.77 and 2023: 0.67
(b) 2021: 1, 2022: 0.87 and 2023: 0.67
(c) 2021: 1, 2022: 0.57 and 2023: 0.67
(d) 2021: 1, 2022: 0.87 and 2023: 0.67
Q.71 A company increased the wages of its workers by 20% between 2022 and 2023, whereas the
consumer price index changed from 150 to 180. The real wages has:
(a) Decreased by 20% (b) Increased by 20%
(c) Remained unchanged (d) Cannot be determined

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Q.72 A company increased the wages of its workers from Rs. 300,000 to Rs. 360,000 per annum,
whereas the consumer price index changed from 115 to 140. The real wages has:
(a) Decreased (b) Increased
(c) Remained unchanged (d) Cannot be determined
Q.73 The index number for the year 2018 is 120, if there is a 20% increase in prices during 2018 and
2019 what will be the index number for 2019?
(a) 140 (b) 143
(c) 144 (d) 145
Q.74 Real wages is income expressed in terms of purchasing power as opposed to actual money
received.
(a) True (b) False
Q.75 ___________ is the sum of gross value added by all resident producers in the economy.
(a) Consumer price index (b) Purchasing power
(c) Gross domestic product (d) None of the above
Q.76 Nominal GDP for the year 2022 is 260 and the price of output has increased significantly from
base year for each of the product produced. This implies that Real GDP will be:
(a) Same as nominal GDP (b) More than nominal GDP
(c) Less than nominal GDP (d) 50% less than nominal GDP
Q.77 Real GDP can be calculated as:
(a) Quantity of output in the current year x price of output in the current year
(b) Quantity of output in the base year x price of output in the current year
(c) Quantity of output in the base year x price of output in the base year
(d) Quantity of output in the current year x price of output in the base year
Q.78 GDP deflator can be calculated as:
(a) Nominal GDP x Real GDP (b) Real GDP / Nominal GDP
(c) Nominal GDP / Real GDP (d) Real GDP x Nominal GDP
Q.79. Following are the details about Annual salary of a person:
Year Salary (Rs) Inflation index
2023 3,000,000 110
2024 ? 120
Compute the percentage increment in salary if the company's policy is to increase salary
every year by inflation rate + 2%
(a) 2% (b) 22%
(c) 12% (d) 11.09%
Q.80 The real wages of a person decreases if:
(a) the rate of increment in nominal wages is more than the rate of inflation
(b) the rate of inflation is less than the rate of increment in nominal wages
(c) the rate of increment in nominal wages is less than the rate of inflation
(d) the rate of increment in nominal wages is same as rate of inflation

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Q.81 A company gives annual increment to its workers such that the increment counters inflation as
well as increases the real wages of workers by 20%. If the rate of inflation between years 2023
and 2024 is 10%. By what percentage must the nominal wages increase to abide by company
policy?
(a) 20% (b) 10%
(c) 30% (d) 32%
Q.82 Annual inflation can be calculated as:
(a) Change in consumer price index from previous year / consumer price index of
previous year x 100
(b) Consumer price index of previous year / Change in consumer price index from previous
year x 100
(c) Consumer price index for current year / 2
(d) Change in consumer price index from previous year x consumer price index of previous
year
Q.83 Following Consumer Price index (CPI) have been computed taking 20X8 as base year:
Year CPI
20X8 104.96
20X9 100
20Y0 116.19
20Y1 15.11
20Y2 132.01
Yearly inflation/(Deflation) for the above data would be
(a) (4.98%), 5.83%, 7.75%, 12.80%
(b) 4.98%, 6.19%, 8.41%, 14.69%
(c) (4.74%), 6.19%, 8.40%, 14.68%
(d) 4.74%, 6.19%, 8.40%, 14.68%
Q.84 Compute the real wages for each of the above years.
Year Pay (Rs.) Price Index
2005 12350 110.1
2006 13500 122.3
2007 14800 137.6
2008 16500 160.2
(a) 11217, 11038, 10766, 10300 (b) 11217, 11038, 10756, 10330
(c) 11217, 11138, 10756, 10300 (d) 11217, 11038, 10756, 10300
Q.85 Compute the amount of pay needed in 2008 to provide buying power equal to that enjoyed in
2006. (by using the above data)
(a) 17,000 (b) 18,500
(c) 17,684 (d) 19,000

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CHAPTER 09 INDICES

Q.86 If the price index for the year 2011 is 191.2, calculate the amount of wages whose buying power
would be the same as that of year 2007? (by using above data)
(a) Rs. 21,800 (b) Rs. 22,600
(c) Rs. 20565 (d) Rs. 19,600
Q.87 The index that measures changes in prices that affect the cost of living of a large fraction of
population is called:
(a) Whole sale price Index Number (b) Simple price relatives
(c) Consumer Price Index Number (d) None of these
Q.88 If the reciprocal of consumer price Index is expressed as the percentage the resulting value is
called:
(a) Rate of inflation (b) Rate of deflation
(c) Purchasing power of money (d) None of these
Q.89 The percentage change in the Consumer Price Index can be used to determine rate of
inflation/deflation. If the CPI increases there is inflation and if the CPI decrease there is
deflation
Q.90 The following data represents the average monthly take-home salary of the employees of an
organization:
Year 2005 2006 2007 2008
Pay ( Rs.) 12,350 13,500 14,800 16,500
Price index 110.1 122.3 137.6 160.2
Compute the amount of pay needed in 2008 to provide buying power equal to that enjoyed in
2006.
(a) 10,300 (b) 17,864
(c) 17684 (d) None of these

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