Index Numbers

Question 1

What are Index umbers used for?

Answer 1

Economists frequently use index numbers when making comparisons over time

Question 2

What is a base year?

Answer 2

The figure an index starts on

Usually 100= Base period

Question 3

What does an index of 103 mean?

Answer 3

3% rise from base year

Question 4

What do index numbers help with?

Answer 4

Understand the significance of a change

Question 5

How do you calculate percentage change?

Answer 5

Change/Original x 100

Question 6

Why do we use weightings?

Answer 6

To show the relative importance of individual data in our findings

Question 7

What are the issues with CPI?

Answer 7

As it is based on an imaginary typical family the CPI never really reflects anyone’s exact spending patterns

Question 8

What is the problem with the basket of goods, used to measure Inflation?

Answer 8

The inflation basket has to include many goods and services that not everyone buys, most people don’t smoke but cigarettes are included