Index Numbers

Q 1.The number of test of Adequacy is:

(a) 2. (b) 3. (c) 4. (d) 5. Solution: (c) 4
Number of Test of Adequacy are 4. They are.
(a) Unit test
(b) Time reversal test
(c) Factor reversal test
(d) Circular test

Q 2.Bowley’s index number is expressed in terms of: [1 Mark, Feb. 2007]

Solution: (a)
Q 3.Fisher’s ideal formula for calculating index number satisfies the _
(a) Unit Test. (b) Factor Reversal Test. (c) Both(a)&(b). (d) None Solution:(c)
Both(a)&(b)

Q 4.Circular Test is satisfied by :

(a) Paasche’s Index Number. (b) The simple geometric mean of price relatives
and the weighted aggregative with fixed weights. (c) Laspeyre’s Index Number.
(d) None
Solution: (b)

Q 5. From the following data:

Group A B C D E F

Group 12 13 9 11 10
95
Index: 0 2 8 5 8

Weigh
6 3 4 2 1 4
t
The general index is given by :
(a) 113.54. (b) 115.30. (c) 117.92. (d) 111.30. Solution: (d) 111.30

Q 6.Cost of living index numbers are also used to find real wages by the process
of
(a) Base shifting. (b) Splicing of index numbers. (c) Deflating of index numbers.
(d) None
Solution:(c)
Real wage is determined after dividing the money by the Cost of Living Index by
using the formula.

Question 7.
The prices of a commodity in the years 1975 and 1980 were 25 and 30
respectively, Price Relative of 1975 on 1980 is
[1 Mark, Aug. 2007]
(a) 113.25
(b) 83.33
(c) 109.78
(d) None
Solution:
(b) 83.33
Q 8.From the following data :

The Marshal Edgeworth index number is :

(a) 144.19. (b) 143.91. (c) 4900. (d) 140.31. Solution: (a) 144.19
CALCULATIONS FOR MARSHALL EDGE WORTH INDEX

Q 9. Laspeyre’s and Paasche’s Method Time Reversal Test:

(a) Do not satisfy. (b) Satisfy. (c) Depends on the case. (d) Can’t say. Solution:
(a)

Q 10.In 2004 for working class people wheat was selling at an average price of ₹
16 per 20 kg, cloth at ₹ 2 per meter, house rent ₹ 30 per house and other items
at ₹ 10 per unit By 2005 cost of wheat rose by ₹ 4 per 20 Kg, house rent by ₹ 15
per house and other items doubled in price. The working class cost of living
index for the year 2005 (with 2004 as base) was 160. By how much did cloth
rose in price during the period:
(a) 1.28. (b) 0.99. (c) 1.73. (d) 1.30. Solution:(d)
Let the Price of cloth be X in 2005
By applying simple average of price relative method.
P01 = ∑P1P0×100 N ⇒ 160 = 475+50x4
⇒ X = 3.30, So, increase in Cloth Price = 3.30 – 2 = 1.30

Q 11.The ratio of price of the single commodity in a given period to its price in
another period is called:
(a) Price Ratio. (b) Price Relative. (c) Base Period. (d) None Solution:(b)
P01 = P1/P0

Q 12.Consumer Price Index Number goes up from 100 to 200 and salary of a
worker is also raised from 300 to 500 The Real Wage is
(a) 300. (b) 250. (c) 600. (d) 350. Solution:(b) 250
The following data is:

Q 13.Using following data, find Paasche’s Index Number

(a) 109.21. (b) 105.28. (c) 110.32. (d) 120.21 Solution: (b) 105.28

Q 14.The Circular Test is known as :

(a) P01 × P12 × P20 = 1. (b) P12 × P01 × P20 = 1. (c) P20 × P12 × P01 = 1. (d) P02 × P21 ×
P12 = 1
Solution:(a) P01 × P12 × P20 = 1

Q 15.Fisher’s Index is based on:-

(a) Arithmetic Mean of Laspeyre and Paasche. (b) Geometric Mean of Laspeyre
and Paasche. (c) Harmonic Mean of Laspeyre and Paasche. (d) Median of
Laspeyre and Paasche
Solution:(b)

Q 16.In Paasche’s index,weights are based on :

(a) Current year quantities. (b) Base year quantities. (c) Weighted average
prices. (d) None. Solution:(a)

Q 17.Fisher’s ideal index does not satisfy:

(a) Time Reversal Test. (b) Factor Reversal Test. (c) Unit Test. (d) Circular test.
Solution:(d)

Q 18._____ P01Q01 = ∑P1Q1 / ∑P0Q0 following test satisfies the above?

(a) Time Reversal Test. (b) Factor Reversal Test. (c) Circular Test. (d) None
Solution:(b)

Q 19.Time reversal & factor reversal are:

(a) Quantity Index. (b) Ideal Index. (c) Price Index. (d) Test of Consistency.
Solution:(d)

Q 20.In Laspeyres Index Number ____ are used as weights?

(a) Base year price. (b) Current year price. (c) Base year quantities. (d) Current
year quantities Solution:(c)
Q 21.In the data group Bowley’s and Laspeyre’s index number is as follows.
Bowley’s index number= 150, Laspeyre’s index number = 180 then Paasche’s
index number is

∵ Dorbish and Bowley’s Index No. = Laspeyere ‘s + Paasche ‘s I.No /. 2

(a) 120. (b) 30. (c) 165. (d) None of these. Solution:(a) 120

∵ 150 = =180+ Paasche ‘s / 2

⇒ 180 + Paasche’s = 300
∴ Paasche’s Index No. = 120

Q 22.
Consumer price index is commonly known as [1 Mark, June 2010]
(a) Chain Based index
(b) Ideal index
(c) Wholesale price index
(d) Cost of living index.
Solution:
(d) Cost of living index.

Q 23.Find the Paasche’s index number for prices from the following data taking
1970 as the base year.

(a) 261.36. (b) 265.48. (c) 274.32. (d) 282. Solution:(a) 261.36

Q 24.The life expectancy, E of male is a linear function of time (year). It is given

that in 1980 the life expectancy was 70 years and in 2000 it was 75 years. Make
a prediction of life expectancy in 2012.
(a) 78. (b) 80. (c) 82. (d) 84. Solution: (a) 78
Given E = at + c,
Where t = Deviation of time from base year 1980
(E being a liner function of time t)
In 1980, t = 1980 – 1980 = 0
The eqn. is. E = a.0 + c = 70 , So, c = 70
In year 2000, t = 2000 – 1980 = 20
E = a.20 + c = 75. So, 20 a +70 = 75
a = 5/20 = 0.25. The Eqn. is E = 0.25t + 70
For year 2012, t = 2012 – 1980 = 32
E = (0.25).(32) + 70 = 78

Q 25.If Laspeyre’s index number is 90 and Paasche’s index number is 160 then ,
Fisher’s index number will _____.
(a) 144. (b) 120. (c) 125. (d) None of these. Solution:(b) 120

Q 26.Wholesale Price Index (WPI) is given by:

(a) Marshall-Edgeworth Index. (b) Laspeyre’s Index. (c) Paasche’s Index. (d)
None.Solution:(b)

Q 27.Fisher’s Ideal index is obtained by:

(a) Arithmetic Mean of Laspeyre’s & Paasche’s index. (b) Geometric Mean of
Laspeyre’s & Paasche’s index.(c) Sum of Laspeyre’s & Paasche’s index. (d) None
of them. Solution:(b)

Q 28.The index number of prices at a place in the year 2008 is 225 with 2004 as
the base year then there is:
(a) average 125% increase in prices. (b) average 225% increase in prices. (c)
average 100% increase in prices. (d) None of the above. Solution:
(a) Let the price of base year 2004 = 100
∴ the Price of current year 2008 = 225
% Increase in Price = 225 – 100 = 125 %

Q 29.Fishers Ideal Index Number not satisfies _____

(a) Unit Test. (b) Time Reversal Test. (c) Circular Test. (d) Factor Reversal Test.
Solution: (c)

Q 30.If the price of all commodities in a place has increased 20% in Comparison
to the base period prices, then the index number of prices for the place is now
_____
(a) 100. (b) 120. (c) 20. (d) 150. Solution: (b) 120
Index No. of current year = 100 + 20 = 120
Q 31.If ΣP0Q0 = 116, ΣpoQ1 = 14o ΣP1Q0 = 97, ΣP1Q1 = 117 then Fisher’s ideal
index number is …………
(a) 184. (b) 83.59. (c) 119.66 (d) 120. Solution: (b) 83.59

Q 32. If Fisher’s index = 150 and Paasche’s Index = 144, then Laspeyre’s index
is _____
(a) 147(b) 156.25
(c) 104.17
(d) 138
Solution:
(b) 156.25

Q.33. Net monthly of an employees was ₹ 3,000. The consumer price index
number in 1985 is 250 with rightly compensated then the additional dearness
allowance to be paid to the employee is: [1 Mark, Dec. 2012]
(a) ₹ 4,000
(b) ₹ 4,800
(c) ₹ 5,500
(d) ₹ 4,500
Solution:
(d) ₹ 4,500

Q 34. Time Reversal Test is satisfied by [1 Mark, June 2013]

(a) Fisher’s ideal index
(b) Dorbish Bowley’s index
(c) Laspeyre’s index
(d) None of these
Solution:
(a) Fisher’s ideal index

Q 35. Bowley’s Index Number = 150, Laspeyre’s index = 180 then Paasche’s
index number is _____ [1 Mark, June 2013]
(a) 120
(b) 130
(c) 105
(d) None
Solution:
(a) 120

Q 36. In 2005 price index is 286 with base 1995 then how much price increased
in 2005 with base 1995? [1 Mark, June 2013]
(a) 286%
(b) 386%
(c) 86%
(d) 186%
Solution:
(d) 186%

Q 37. An index time series is a list of numbers for two or more periods of time
(a) Index
(b) absolute
(c) Relative
(d) None [1 Mark, Dec. 2013]
Solution:
(a) Index
(a) is correct.

Q 38.Circular test is satisfied by which index number?

(a) Laspeyre’s
(b) Paasche’s
(c) Fisher’s
(d) None of the above
Solution:
(d) is correct

Q 39. Fisher’s index number is ____ of Laspayre’s and Paasche’s index numbers
[1 Mark, June 2014]
(a) A.M.
(b) G.M.
(c) H.M.
(d) None
Solution:
(b) G.M.

Q 40. Which of the following statement is true ? [1 Mark, June 20]

(a) Paasche’s index number is based on base year quantity
(b) Fisher’s index satisfies the circular test
(c) Arithmetic mean is the most appropriate average for constructing the index
number
(d) Splicing means constructing one continuous series from two different indices
on the basis of common base
Solution:
(d)

Q 41. When the prices are decreased by 30% then the index number is now [1
Mark, Dec. 2014]
(a) 50
(b) 60
(c) 70
(d) 30
Solution:
(c) 70

Q 42. _____ play a very important role in the construction of index number. [1
Mark, June 2015]
(a) Weights
(b) Classes
(c) Estimate
(d) None
Solution:
(a) Weights

Q 43. If with a rise of 10% in prices the wages are increased by 20% the real
wage increases by [1 Mark, June 2015]
(a) 10%
(b) More than 10%
(c) 20%
(d) Less than 10%
Solution:
(d)

Q 44. Consumer Price index number for the year 1957 was 313 with 1940 as the
base year. The Average Monthly wages in 1957 of the workers into factory be ₹
160/- their real wages is: [1 Mark, Dec. 2015]
(a) ₹ 48.40
(b) ₹ 51.12
(c) ₹ 40.30
(d) None of these
Solution:
(b)

Q 45. Purchasing power of money is [1 Mark, June 2016]

(a) Reciprocal of price index number
(b) Equal to price index number
(c) Unequal to price index number
(d) None of these
Solution:
(a)

Q 46. The suitable index numbers for the comparison of every year is
(a) Fixed base index number
(b) Fisher’s ideal index number
(c) Chain base index number
(d) Both (a) and (c)
Solution:
(c) Chain base index number

Question 59.
Index numbers are used in
(a) Economics
(b) Statistics
(c) Both (a) & (b)
(d) None
Solution:
(c)

Question 65.
For knowing consumers price index number we want to collect data from : [1
Mark, Dec. 2017]
(a) Retail shop prices
(b) Wholesale shop prices
(c) Fair prices
(d) Government depots
Solution:
(a) Retail shop prices

Question 66.
The circular test is an extension of:
(a) The time reversal test
(b) The factor reversal test
(c) The unit test
(d) None of these
Solution:
(a) The time reversal test

Question 71.
To overcome the disadvantage of a simple average of relative method, we can
use ____:
(a) Weighted average of relative method
(b) Chain base index number
(c) Simple aggregative method
(d) Fixed base index number
Solution:
(a) Weighted average of relative method

Question 72.
Time reversal & factor reversal are : [1 Mark, May 2018]
(a) Quantity Index
(b) Ideal Index
(c) Price Index
(d) Test of consistency
Solution:
(d) Test of consistency

Question 73.
A series of numerical figures which show the relative position is called [1 Mark,
May 2018]
(a) Index number
(b) Relative number
(c) Absolute number
(d) None
Solution:
(a) Index number

Question 83.
The simple average method is used to calculate: [1 Mark, Nov. 2018]
(a) Trend Variation
(b) Cyclical Variation
(c) Seasonal Variation
(d) Irregular Variation
Solution:
(c) Seasonal Variation

Question 85.
Which one is called an ideal index number [1 Mark, June 2019]
(a) Laspeyre’s index number
(b) Paasche’s index number
(c) Fisher’s index number
(d) Marshall Edgeworth index number
Solution:
(c) Fisher’s index number

Question 86.
Which one is called an ideal index number
(a) Laspeyre’s index number
(b) Paasche’s index number
(c) Fisher’s index number
(d) Marshall Edgeworth index number [1 Mark, June 2019]
Solution:
(c) Fisher’s index number
Fisher’s Index No. is called an Ideal Index Number.

Question 87.
Which is not satisfied by Fisher’s Ideal index number ? [1 Mark, June 2019]
(a) Factor Reversal Test
(b) Time Reversal Test
(c) Circular Test
(d) None of the above
Solution:
(c) Circular Test