Worksheet: Index Numbers | Economics Class 11 - Commerce PDF Download

Multiple Choice Questions 
Q1: An index number which accounts for the relative importance of the items is known as
(a) Weighted index
(b) Simple aggregative index
(c) Simple average of relatives
(d) None of the above

Q2: The ...... value of index number is a pure number.
(a) average
(b) commodity
(c) price relative
(d) All of these

Q3: The item having the highest weight in consumer price index for industrial workers is
(a) food
(b) housing
(c) clothing
(d) None of these

Q4: Index numbers are very helpful in comparing the economic conditions of a particular group of people for ____ different periods.
(a) three
(b) two
(c) four
(d) None of these

Q5: In general, inflation is calculated by using
(a) Wholesale Price Index
(b) Consumer Price Index
(c) Producer’s Price Index
(d) None of these

Q6: Which of the following devices is used for measuring differences in the magnitude of a group of related variables?
(a) Arithmetic mean
(b) Index number
(c) Correlation
(d) Mode

Q7: The impact of change in the price of a commodity with little weight in the index will be
(a) small
(b) large
(c) uncertain
(d) None of these

Q8: Statement I An appropriate method for working out consumer price index is family budget method.
Statement II Index numbers are devices for measuring differences in the magnitude of a group of related variables.
Alternatives
(a) Statement I is correct and Statement II is incorrect
(b) Statement II is correct and Statement I is incorrect
(c) Both the statements are correct
(d) Both the statements are incorrect

Q9: In most of the weighted index numbers the weight pertains to
(a) base year
(b) current year
(c) both base and current year
(d) None of these

Q10: Which of the following index numbers is based on the assumption that all the commodities are of equal importance?
(a) Weighted index number
(b) Simple index number
(c) Both (a) and (b)
(d) None of these

Q11: Statement I Construction of index numbers only needs choosing commodity basket.
Statement II Index numbers have universal acceptance.
Alternatives
(a) Statement I is correct and Statement II is incorrect
(b) Statement II is correct and Statement I is incorrect
(c) Both the statements are correct
(d) Both the statements are incorrect

Q12: If Laspeyre’s index is 110 and Paasche’s index is 108, fisher’s index will be
(a) 100
(b) 108
(c) 109
(d) None of these

Q13: In Laspeyre’s index number, the weight pertains to  
(a) base year quantities
(b) current year
(c) Both (a) and (b)
(d) None of these

Q14: Choose the correct pair.  

Codes
(a) A–(i)
(b) B–(ii)
(c) C–(iii)
(d) None of these

Q15: Factor Reversal Test is expressed in terms of
(a) ∑P₁Q₁/∑P₀Q₀
(b) ∑P₁Q₀/∑P₀Q₀/∑P₁Q₁/∑P₀Q₁
(c) ∑P₁Q₁/∑Q₀P₁
(d) ∑Q₁P₀/∑Q₀P₀ X∑P₁Q₁/∑Q₀P₁ 
Ans: (d)

Assertion-Reasoning based MCQs

Q2: Assertion (A) A better way to estimate GDP accurately is to deflate input and output prices through separate indices.
Reason (R) When output prices move relatively faster than the input prices, the single deflation method overestimates GDP.

Q3: Assertion (A) Value index is based upon both price and quantity.
Reason (R) Value is calculated by the product of price and quantity.

Q4: Assertion (A) Wholesale price index is used to measure the changes in the prices of goods that impacts individual.
Reason (R) Positive value of index number indicates rise in general price levels.

Q5: Assertion (A) Fisher’s method of index number is considered as ideal weighted method of index numbers.
Reason (R) Fisher’s method passes all statistical tests of time and factor reversal.

Read the following case study graph and answer the question 

Q7: Which year shows a decrease in stock price as per the given graph?
(a) 2017
(b) 2018
(c) 2019
(d) 2020

Q8: Which year is considered as the base year for constructing Sensex in India?
(a) 1978-79
(b) 2000-01
(c) 2004-05
(d) 2011-12

Q9: ____ type of average is used to calculate the value of index number.
(a) Simple
(b) Weighted
(c) Proportionate
(d) Both (a) and (b)

Q10: Index number is always expressed in terms of ____
(a) percentage
(b) proportionate
(c) Both (a) and (b)
(d) None of these  

Q11: The given graph shows 0.64% increase, what does it indicate?
(a) Rise in number of stocks
(b) Rise in stock prices
(c) Fall in stock price
(d) None of these  

Direction Read the following case study and answer the question no. (i) to (vi) on the basis of the same.
We frequently see index numbers, such as the Consumer Price Index (CPI), in our daily life.
Economists often use the index numbers to compare values measured at different points in time. Using an index can make quick comparisons
easy. The index numbers have become a widely accepted statistical device for measuring business activity changes. A typical use of the index number technique in business is to summarize complex situations with a single performance index so that a dashboard (or report) would have enough space to show all KPIs. An index number is used to measure changes in the magnitude of a variable or group of variables regarding time,geographical location, or other characteristics such as profession.
IT professionals who need to analyse economic and business activities, but have limited experience in statistics, want to learn how to construct and interpret performance indexes. Index numbers are also not free from criticism as its base year and commodity selection requires a lot of attention and expert attention.
Q12: Choose the correct statement from given below
(a) Index numbers are cent percent accurate
(b) There is null possibility of biasness in case of index numbers
(c) Index number is based upon all the items given in the data
(d) All of the above  

Q13: Which of the following problems comes in the construction of index numbers?
(a) Selection of base year
(b) Selection of commodities
(c) Selection of quantities
(d) All of these

Q14: Index numbers can be used in which of the following fields?
(a) Geographical areas
(b) Change in magnitude of a variable
(c) Change in time periods
(d) All of the above

Q15: Application of index numbers which is based on data related to different time period is known as ____ .
(a) Time series data
(b) Temporal data
(c) Inter-temporal data
(d) All of these

Q16: Assertion (A) Selection of incorrect base leads to mis-leading conclusion.
Reason (R) A year with high fluctuations in prices should not be considered as base year.
Alternatives
(a) Both Assertion (A) and Reason (R) are true and Reason (R) is the correct explanation of Assertion (A).
(b) Both Assertion (A) and Reason (R) are true, but Reason (R) is not the correct explanation of Assertion (A)
(c) Assertion (A) is true, but Reason (R) is false
(d) Both are false

Q17: Economists often use the index numbers to ...........values measured at different points in time.
(a) measure
(b) change
(c) compare
(d) All of these

Short Answer Type Questions

Q2: Why do we need an index number?

Q3: What are the desirable properties of the base period?

Q4: If the salary of a person in the base year is ₹4,000 per annum and the current year salary is ₹6,000, by how much should his salary rise to maintain the same standard of living, if the CPI is 400?

Q5: What is the difference between a price index and a quantity index?

Q6: Give the limitations of simple aggregative method of computing index number.

Q7: Which method is considered ‘ideal’ for constructing index number and why?

Q8: Mr Ashok was getting ₹ 400 in the base year and ₹ 800 in the current year. If Consumer Price Index is ₹ 350, then what extra amount is required for maintaining the earlier standard of living?

Q9: Explain briefly the process of data collection for Consumer Price Index (CPI).

Long Answer Type Questions

Q2: Explain briefly the various characteristics or features of index numbers.