18- Quantitative methods

Question 1

Purpose of index numbers

Answer 1

They are a useful way of expressing economic data time series and comparing/contrasting information.

Question 2

Base of index number

Answer 2

100

Question 3

How to calculate index number

Answer 3

Index number in y= (Data in y / Base year value) x 100

Question 4

Frequently used index numbers?

Answer 4

• FTSE 100
• CPI
• Exchange rate index
• Index of house prices
• Index of GDP and GNI

Question 5

% change equation

Answer 5

(New-old / old) x100

Question 6

How to calculate weighted index numbers e.g. inflation

Answer 6

1) Weights x index
2) Add up all (weight x index)
3) Total / 1000

Question 7

Nominal numbers

Answer 7

At current prices or unadjusted rate, without taking inflation or other factors into account.

Question 8

Real numbers

Answer 8

Data is adjusted for general price level changes over time.

Question 9

How to work out real prices?

Answer 9

Real price = nominal price ÷ (price index/100)

Question 10

How to see if real price has increased?

Answer 10

If nominal prices increase > rate of inflation

Question 11

How to see if real price has decreased?

Answer 11

If nominal price increase < rate of inflation

Question 12

How to see if real price has remained constant?

Answer 12

If nominal price increase = rate of inflation

Question 13

Terms of trade (ToT) equation

Answer 13

ToT = (Average export index / average import price) x 100

Question 14

How to work out inflation between years?

Answer 14

% change