An index number is primarily used to measure ___ in the value of a variable over time.

Relative changes

Price relatives are calculated by taking the ratio of the price of a commodity in a given period to its price in the ___ period.

Base

True or False: Laspeyres' index number takes current year quantities as weights.

False. Laspeyres' index uses base year quantities as weights.

What is the primary purpose of a consumer price index?

To measure changes in the purchasing power of consumers by tracking price changes for a specified basket of goods and services.

What is one major limitation of the simple aggregate method for constructing index numbers?

It does not account for the relative importance of different commodities, leading to potentially biased results.

True or False: The time reversal property states that if two periods are interchanged, the corresponding price relatives remain unchanged.

False. The time reversal property indicates that the price relatives are reciprocals of each other when periods are interchanged.

What is the significance of a weighted average in constructing index numbers?

A weighted average reflects the relative importance of different items, thereby providing a more accurate representation of changes in overall value.

Fill in the blank: The method of combining data for index numbers can be either through ___ or averaging of relatives.

Aggregate values

Why are price indices important for economic analysis?

They provide insights into inflation, cost of living adjustments, and overall economic stability by tracking price changes over time.