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Each of the following statements is either True or False. Write your choice of the answer by writing F for false.
  • a)
    Geometric mean is the most appropriate average to be used for constructing an index number.
  • b)
    Weighted average of relatives and weighted aggregative methods render the same result.
  • c)
    Fisher Ideal Index Number is a comprise between two well known indices - not a right compromise, economically speaking.
  • d)
    Like all statistical tools, index numbers must be used with great caution.
Correct answer is option 'C'. Can you explain this answer?
Most Upvoted Answer
Each of the following statements is either True or False. Write your c...
Explanation:


The correct answer to this statement is option 'C', i.e., Fisher Ideal Index Number is a comprise between two well-known indices - not a right compromise, economically speaking. The explanation for this statement is as follows:

Fisher Ideal Index Number:


Fisher Ideal Index Number is an index number that combines both Laspeyres and Paasche index numbers. It is a compromise between the two indices, and it is not considered a right compromise economically. The Fisher Ideal Index Number is calculated by taking the geometric mean of the Laspeyres and Paasche indices. It is expressed as:

Fisher Ideal Index Number = √(Laspeyres Index × Paasche Index)

Laspeyres Index:


Laspeyres Index is a type of index number in which the base year quantities are used as weights. It is also known as the base-year index. It measures the change in the cost of purchasing a fixed basket of goods and services in the current year as compared to the cost of purchasing the same basket of goods and services in the base year. Laspeyres Index is calculated as:

Laspeyres Index = (Total cost of goods and services in the current year / Total cost of goods and services in the base year) × 100

Paasche Index:


Paasche Index is a type of index number in which the current year quantities are used as weights. It is also known as the current-year index. It measures the change in the cost of purchasing a variable basket of goods and services in the current year as compared to the cost of purchasing the same basket of goods and services in the base year. Paasche Index is calculated as:

Paasche Index = (Total cost of goods and services in the current year / Total cost of goods and services in the current year) × 100

Conclusion:


Hence, from the above explanation, we can conclude that option 'C', i.e., Fisher Ideal Index Number is a comprise between two well-known indices - not a right compromise, economically speaking, is the correct answer.
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Each of the following statements is either True or False. Write your choice of the answer by writing F for false.a)Geometric mean is the most appropriate average to be used for constructing an index number.b)Weighted average of relatives and weighted aggregative methods render the same result.c)Fisher Ideal Index Number is a comprise between two well known indices - not a right compromise, economically speaking.d)Like all statistical tools, index numbers must be used with great caution.Correct answer is option 'C'. Can you explain this answer?
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