Module 5 : National Accounts

Question 1

What is a quantity index?

Answer 1

The objective is to measure the change in the value of basket of goods at a constant price

• Which set of constant prices is what we use to differentiate different indexes

Question 2

What is the ‘summation operator’?

Answer 2

The sum operator is used to comapctly define a long sum

n = The total number’s we have
i = where it starts
xi = what we’re essentially looking for

Question 3

Can the xi have more than one subscript?

Answer 3

Yes

ex: pit*qit

Question 4

What is a ‘paasche quatitiy index’?

Answer 4

This index fixes the prices to the current period

Question 5

What does the equation look like?

Answer 5

Let the base year be 0
pit = price of good i at time t
qit = quantity of good i at time t

PQt/0 = pitqit / pitqi0

Sum of all together

Question 6

How to find the total amount at a year?

Answer 6

Xt = Xt-1*(1+ g)
Gr = paasche index but not multiplied by 100
(the growth rate is the difference between the two period (120.54-100)

Xt-1 is the total value from the previous period

Question 7

What is the laspeyers quantity index? (LQ)

Answer 7

This idnex uses the prices of the base period.

It calculates the same way as paasche idex but instead of using the current price we use the base price

Question 8

To find the real value at a specific year is it the same way as before with paasche?

Answer 8

YES!

xt = xt-1*(1+GR)

Question 9

What is the ‘chained quantity index’?

Answer 9

This was created as the weakness of the lasperyes and pasache index is that there are both based on the value of a basket of goods using prices from a distant period.

However the solution to fix is to never use prices and quantities that are separated by more than 1 period, where the meaning of 1 period is determined by the frequency of the data. Therefore, it is 1 month for monthly data and 1 quarter for quarterly data.

In our example, we only have observations every 5 years, so one period means 5 years.

Question 10

What is the equation for the chained Paasche index?

Answer 10

base 100 = 0

CPQ t/0 = PQ1/0 *PQ2/1 *PQ3/2 * PQt/t-1 *100

[You use the price of the current period)

Question 11

What is the equation of the chained laspheres index?

Answer 11

• You do the same process but use the price of the base

base 100 = 0

CPQ t/0 = PQ1/0 *PQ2/1 *PQ3/2 * PQt/t-1 *100

Question 12

What is ‘fisher quantity index’?

Answer 12

This is the idea that teh ideal index should be between paasche and laspeyers

FQt/0 = 100* square root[chained paasche index * lasperyes index]

Question 13

What are price indexes?

Answer 13

Are like quantity indexes but instead the quantities are held fixed instead of price

• Purpose is to measure change in the value of a fixed basket of goods
• A higher price index means a given basket of goods cost more

Question 14

What is paasche price index?

Answer 14

Its the quantity being held fixed as the current basket of goods

PPt/0 = pitqit / Pi0qit

Question 15

chained paasche price index?

Answer 15

same proces but instead quantiies are fixed

Question 16

Laspeyers price index?

Answer 16

Its the basket of goods we hold fixed

same process for the chained part

Question 17

Fisher price index?

Answer 17

Its the geometric avergae between paasche and laspeyres price index