Chapter No.
09 Indices
Q.1
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.2 Calculate Fisher’s Price Index for the year 2011.
Commodities Price (Rs) Quantity (kg)
2010 2011 2010 2011
Alpha 64 75 270 276
Beta 40 45 124 118
Gamma 18 21 130 121
Eta 58 68 185 267
(a) 105.57 (b) 110.44
(c) 116.57 (d) None of these
Q.3 Which of the following statement is/are correct?
(i) In Laspeyre price index, the denominator does not change from year to year.
(ii) In Paasche’s 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.4 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
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Q.5 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
Q.6 Why Laspeyre price index 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 construct 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.7 Find Price index using average method for 2018?
Years Kerosene Petrol Diesel
2017 304 102 100
2018 100 100 105
(a) 100 (b) 78.64
(c) 88.25 (d) 95.226
Q.8 Find Laspayer’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.9 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
Find Laspeyre’s Price index.
(a) 143% (b) 132%
(c) 194% (d) 167%
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Chapter No. 09 Indices
Q.10 Following Consumer Price index (CPI) has been computed taking 20X8 as base year:
Year CPI
20X8 104.96
20X9 100
20Y0 116.19
20Y1 115.11
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%), 16.19%, (0.92)%, 14.68%
(d) 4.74%, 6.19%, 8.40%, 14.68%
Q.11 The barometer of commerce is:
(a) Standard deviation (b) Co efficient of variation
(c) Index number (d) None of the above
Q.12 Comparison year is called ………
(a) Current year (b) Base year
(c) Both a & b (d) None of these
Q.13 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.14 What is effect of Paasche’s index No. on inflation?
(a) Its understate inflation (b) Neutral
(c) Its overstate inflation (d) No impact
Q.15 What is effect of Laspeyre’s index No. on inflation?
(a) Its understate inflation (b) Neutral
(c) Its overstate inflation (d) No impact
Q.16 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.17 Laspeyre price index shows prices of
(a) Base year (b) Current year
(c) Both (d) None of these
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Chapter No. 09 Indices
Q.18 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.19 Laspeyre price index what value is to be changed every year?
(a) Price (b) Quantity
(c) Both (d) None of these
Q.20 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.21 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.22 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.23 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.24 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.25 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 No. 09 Indices
Q.26 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.27 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.28 The price of commodity in different years is given below: compute the Link relative 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, 106.89 (d) 100, 105.50, 116.50, 114.50
Q.29 The weight used in aggregate quantity index is:
(a) Percentage of total quantity (b) Prices
(c) Average of quantities (d) None of these
Q.30 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
Q.31 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.32 Index numbers are used as the barometers of:
(a) Prices (b) Quantities
(c) Inflation (d) None of these
Q.33 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
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Q.34 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%
Q.35 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.36 _______________ tends to understate inflation.
(a) Laspeyer’s Index Number (b) Paasche’s Index Number
(c) Fisher’s Index Number (d) All of these.
Q.37 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.38 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.39 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.40 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.41 Four years ago the price index of a particular product was 60. If the same index is now
108. Compute percentage increase in the price of a product.
(a) 80% (b) 48%
(c) 58% (d) 60%
Q.42 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.
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Chapter No. 09 Indices
(a) 135 (b) 140
(c) 40 (d) 125
Q.43 In Laspeyre price index number, quantities belonging to _____ year are taken as weight.
Therefore, sometimes this method is called ______ year quantity weight method.
Q.44 The percentage change in the Consumer Price Index can be used to determine rate of
__________. If the CPI increases there is ______ and if the CPI _____ there is deflation
Q.45 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.46 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.47 The Paasche price index measures ____ changes with reference to current quantities of
goods in the basket.
(i) Price (ii) Quantity
Q.48 ______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.49 If the Fisher index is 10% more than the Base year index and Laspeyer’s index is 109.5,
find Paasche’s index.
(a) 115.6 (b) 96.5
(c) 100.51 (d) 132.5
Q.50 The per capita income in a country has increased from Rs 45000 in year 2018 to Rs
96000 in the year 2023. Taking 2018 as base year, the consumer price index in 2023
stood at 160. What will the real per capita income?
(a) 96,000 (b) 90,000
(c) 120,000 (d) 60,000
Q.51 The income of a person in year 2017 is Rs 250,000 and cost of living index for that class
of persons is 237.5. What is his real income?
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Chapter No. 09 Indices
(a) 105,263.16 (b) 250,000
(c) 237,000 (d) cannot be determined
Q.52 Which of the following statement/s is/are correct with respect to index numbers?
(a) Index numbers are expressed in percentages which made it feasible to compare
any or more index numbers.
(b) Index numbers are of comparable nature at any two time period or place or any
other situation.
(c) In index numbers the two periods, one is known as the base period and the other,
the current period are always comparable with each other
(d) All of the above
Q.53 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.54 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.55 Laspeyre price index tends to overstate inflation whereas the Paasche price index tends to
understate it. This is because consumers react to price increases by changing what they
buy.
(a) True (b) False
Q.56 Which of the following is/are correct?
1. Fisher index is computed for a given period by taking the square root of the
product of the Paasche index value and the Laspeyre index value.
2. Fisher index is said to be geometric mean of the Paasche and Laspeyre indices.
3. Purchasing power can be calculated if consumer price index is given.
(a) 1 and 2 (b) 1 and 3
(c) 2 and 3 (d) All three are correct
Q.57 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
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