The value index is equal to:a)The total sum of the values of a given year multiplied by the sum of the values of the base year.b)The total sum of the values of a givn year Divided by the sum of the values of the base year.c)The total sum of the values of a given year plus by the sum of the values of the base year.d)None of these.Correct answer is option 'B'. Can you explain this answer?

Question

Answer

The Value Index

The value index is a measure used to compare the value of a variable or indicator in a given year to its value in a base year. It is commonly used in economics and statistics to assess changes in prices, production, or other economic factors over time. The value index is calculated by dividing the total sum of the values in a given year by the sum of the values in the base year.

Explanation

The correct answer is option B, which states that the value index is equal to the total sum of the values of a given year divided by the sum of the values of the base year. Let's understand why this is the correct answer.

Comparing Values

When comparing values of a variable across different time periods, it is important to establish a reference point or base year. The base year is typically chosen as a representative year for comparison purposes. The value index is used to measure the change in the variable from the base year to the given year.

Calculating the Value Index

To calculate the value index, we need to follow these steps:

1. Determine the values of the variable for the base year and the given year.
2. Add up all the values for the base year and the given year separately.
3. Divide the total sum of the values for the given year by the total sum of the values for the base year.
4. Multiply the result by 100 to express the value index as a percentage.

The formula for the value index can be represented as follows:

Value Index = (Total sum of values in the given year / Total sum of values in the base year) * 100

Interpreting the Value Index

The value index provides a measure of the relative change in the variable from the base year to the given year. A value index greater than 100 indicates an increase in the variable, while a value index less than 100 indicates a decrease. For example, a value index of 120 means that the variable has increased by 20% compared to the base year.

Conclusion

In summary, the value index is calculated by dividing the total sum of the values in a given year by the sum of the values in the base year. This measure allows us to compare the values of a variable across different time periods and assess the relative change.

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