9. Index Numbers

Question 1

What is the fixed base method of calculating index number?

Answer 1

In the fixed base method a base year is selected and all subsequent changes are measured against this base.

Question 2

What is the chain base method of calculating index numbers?

Answer 2

Changes are calcul;ated with respect to the value of the item in the period immediately before.

Question 3

The measures of the change in monetary value of a group of items over time are called?

Answer 3

Price indices.

Question 4

What are volume(quantity) indices?

Answer 4

The change in the non-monetary values of a group of items over time.

Question 5

What is the formula for base weighted price index?

Answer 5

Sum of [w x P1/Po / Sum of w]

w = Weights using base year values 
P1 = Prices in current year 
Po = Prices in the base year

Question 6

How is the base weighted price index different from the current weighted price index.

Answer 6

The current price index uses the change in price of a basket of goods to weight the rice rises by the quantity currently being purchased.