Kerala Plus One Economics Chapter Wise Previous Questions Chapter 18 Index Numbers
Question 1.
Pick the odd one out: (March 2009)
Consumer price index, wholesale price index, producer’s price index, human development index.
Answer:
human development index
Question 2.
The following are the prices of certain necessary commodities in the base year price and current year price. Calculate a simple aggregate price index. (Say 2009)
Answer:
P01 = \(\frac{\Sigma P_{1}}{\Sigma P_{0}} \times 100\) = 115.9
Question 3.
Write the importance of index number in economics. (March 2010)
Answer:
Wholesale price index number (WPI), consumer price index number (CPI) and industrial production index (IIP) are widely used in policymaking.
Consumer index number (CPI) or cost of living index numbers are helpful in wage negotiation, formulation of income policy, price policy, rent control, taxation and general economic policy formulation.
The wholesale price index (WPI) is used to eliminate the effect of changes in prices on aggregates such as national income, capital formation etc.
The WPI is widely used to measure the rate of inflation. Inflation is a general and continuing increase in prices. If inflation becomes sufficiently large, money may lose its traditional function as a medium of exchange and as a unit of account. Its primary impact lies in lowering the value of money.
CPI are used in calculating the purchasing power of money and real wage:
Index of industrial production gives us a quantitative figure about the change in production in the industrial sector.
Agricultural production index provides us a ready reckoner of the performance of agricultural sector.
Sensex is a useful guide for investors in the stock market. If the sensex is rising, investors are optimistic of the future performance of the economy. It is an appropriate time for investment.
Question 4.
Calculate simple agregate price index using the for 2008 taking 1998 as the base year from the following data. (March 2011)
Answer:
Calculate simple aggregate price index using the formula,
P01 = \(\frac{\sum P_{1}}{\sum P_{2}} \times 100\)
Question 5.
Find the index value for the following selected commodities using Laspeyre’s method. (March 2012)
Answer:
Question 6.
There are two methods of constructing an index number. What are they? (Say 2012)
Answer:
1) Simple index numbers
2) Weighted index number
Question 7.
Complete the table. (March 2013)
Answer:
1) Consumer Price Index (CPI)
2) Wholesale Price Index (WPI)
Question 8.
True or False. (Say 2013)
The consumer price index is also known as the cost of living index.
Answer:
True
Question 9.
True or False. (March 2014)
In India, inflation is calculated by using the wholesale price index.
Answer:
True
Question 10.
Find the simple aggregative price index for the following selected commodities. (March 2014)
Answer:
Simple aggregative price index
Question 11.
Anju calculated the value of the price index number as 135 and interpreted that price as said to have risen by 135%. Is Anju’s interpretation correct? Justify. (Say 2014)
Answer:
No. Price has risen by 35%
Question 12.
Your friend is confused between the equations of Laspeyres and Paasche’s price indices. If you point out anyone, she can write the other. Can you help her? (Say 2014)
a) Paasche’s index number __________
b) Laspeyer’s index number __________
Answer:
Question 13.
Make three pairs from the following. (March 2015)
(Fiscal Policy, Spearman, Index number, Taxation, Rank Correlation, Laspeyer.)
Answer:
- Fiscal policy – Taxation
- Spearman – Rank correlation
- Index number – Laspeyer
Question 14.
Calculate the simple aggregative price index for the commodities given below. (March 2015)
Answer:
Simple Aggregative Price Index
Question 15.
Explain the issue in the construction of index numbers. (Say 2015)
Answer:
Yes, certain important issues should be kept in mind, while constructing an index number. Those issues are mentioned below:
You need to be clear about the purpose of the index. Calculation of a volume index will be inappropriate when one needs a value index.
Besides this, the items are not equally important fordifferent groups of consumers when a consumer price index is constructed. The rise in petrol price may not directly impact the living condition of the poor agricultural labourers. Thus the items to be included in any index have to be selected carefully to be as representative as possible. Only then you will get a meaningful picture of the change.
Every index should have a base. This base should . be as normal as possible. Extreme values should not be selected as base period. The period should also not belong to too far in the past. The comparison between1993 and 2005 is much more meaningful than a comparison between 1960 and 2005. Many items in a 1960 typical consumption basket have disappeared at present. Therefore, the base year for any index number is routinely updated.
Another issue is the choice of the formula, which depends on the nature of the question to be studied. The only difference between Laspeyres’ index and Paasche’s index is the weights used in these formulae.
Besides, there are many sources of data with different degrees of reliability. Data of poor reliability will give misleading results. Hence, due care should be taken in the collection of data. If primary data are not being used, then the most reliable source of secondary data should be chosen.
Question 16.
Find the simple aggregative price index for the following selected commodities. (March 2016)
Answer:
Simple aggregate price Index
Question 17.
A consumer price index measures the changes in ________ (March 2016)
a) Retail prices
b) Wholesale prices
c) Producer’s prices
d) None of these
Answer:
a) Retail prices
Question 18.
True or False.
Rank correlation coefficient was developed by Karl Pearson. (Say 2016)
Answer:
False
Question 19.
From the following data, construct index number for 2014 taking 2013 as base year, using simple aggregate method. (Say 2016)
Answer:
Simple aggregate Index number
Question 20.
Calculate the Consumer Price Index (CPI). (March 2017)
Answer:
Question 21.
The current and base year prices of a group of commodities are Rs. 180 and Rs. 135 respectively. It shows ________ (March 2017)
a) price is said to have risen by 30.33%
b) price is decreased by 33.33%
c) price is increased by 133.33%
d) None of these
Answer:
a) price is said to have risen by 33.33%