4.2.1.3 Uses of index numbers NOTES

What value is typically set for the base year in index numbers?

• 1

• 0

• 10

• 100

If an index number in a certain year is 90, what does it indicate?

• 90% increase from the base year

• 10% decrease from the base year

• 10% increase from the base year

• No change from the base year

How do you calculate the percentage change using index numbers between two periods?

• (Index Number in Later Year - Index Number in Earlier Year) / Index Number in Earlier Year * 100

• (Index Number in Earlier Year - Index Number in Later Year) / Index Number in Later Year * 100

• Sum of Index Numbers / Number of Years

• Average of Index Numbers over the periods

What does an index number of 110 suggest?

• No change from the base year

• 10% increase from the base year

• 110% increase from the base year

• 10% decrease from the base year

What is the percentage change from 2015 to 2020 if the index numbers are 108 and 115 respectively?

• 6%

• 6.48%

• 7%

• 5.5%

What does a consumer price index (CPI) of 120 in 2020 indicate if 2010 is the base year?

• No change in price level

• Price level has decreased by 20%

• Price level has increased by 20%

• Price level has increased by 120%

What is the purpose of using weights in an index number calculation?

• To reflect the relative importance of different items

• To increase the value of the index

• To balance the index number

• To simplify the calculation

What is the main use of index numbers in economics?

• Measuring changes in price levels

• Calculating interest rates

• Determining the population growth

• Assessing technological advancements

How are salary and pension adjustments often determined using CPI?

• To keep pace with inflation

• To reduce payments

• To decrease tax liabilities

• To increase investment returns

What does an index number of 125 indicate if the base year is set at 100?

• 25% decrease from the base year

• No change from the base year

• 25% increase from the base year

• 125% increase from the base year