Deck 17: Index Numbers

Question 1

All indexes have the same base, namely 1982-84, written 1982-84 = 100.

Answer 1

False

Question 2

An index of 239.2 represents a 239.2% change.

Answer 2

False

Question 3

An index number is a percent that measures the change in price, quantity, or value, compared to a base period.

Answer 3

True

Question 4

Etienne Laspeyres developed a method in the latter part of the 18^th century to determine a weighted index using base-period weights.

Question 5

There are several indexes that reflect the overall economic activity in the United States. The federal government puts out an index of leading economic indicators. It includes such diverse economic indicators as stock prices, new orders for plants and equipment, and building permits issued. These indexes are usually referred to as _______________.

Question 6

The Laspeyres method uses the amounts consumed in the base period, q₀, as weights to determine a price index.

Question 7

A simple aggregate index compares the sum of values in the current period to the sum of values in a base period.

Question 8

The Consumer Price Index measures the change in prices of a fixed market basket of goods and services from one period to another.

Question 9

Two methods of computing a weighted price index are the Laspeyres method and Paasche's method.

Question 10

_____ is the symbol used to designate a base period price.

Question 11

The base year for the Consumer Price Index is _______.

Question 12

The ________________ index measures the average change in prices received in the primary markets of the United States by producers of commodities.

Question 13

One function of the CPI is to allow consumers to determine the degree to which their purchasing power is being eroded by price increases.

Question 14

An example of a weight used in the calculation of a weighted index is quantity consumed in a base period.

Question 15

In the numerator of a value index, the price and quantity are both from the current period.

Question 16

The index for a single commodity is called the __________.

Question 17

The Laspeyres method computes a weighted index.

Question 18

An example of a weighted index is P = p_t/p₀.

Question 19

A value index method computes a simple aggregate index.

Question 20

The Paasche method uses the amounts consumed in the base period, q₀, as weights to determine a price index.

Question 21

The index that combines the advantages of two popular weighted indices is called ____________________.

Question 22

The Dow Jones Industrial Index is a ____________________.

Question 23

The percent that measures the change in price, quantity, value, or some other item of interest from one time period to another is called the ______________________.

Question 24

The ___________ method of computing index numbers has the disadvantage that the base period quantities or weights are realistic.

Question 25

_____ is the usual index number associated with the base period for the CPI.

Question 26

The _________ method for computing a weighted price index uses current year weights.

Question 27

The purpose of an index is to _____________________________________.

Question 28

The ________ method of computing index numbers has the advantage that the consumption pattern is always up-to-date.

Question 29

Cost-of-living adjustments are based on the _______________________.

Question 30

In a weighted index, the __________ variable is usually the weight.

Question 31

The __________ method for computing a weighted price index uses base year weights.

Question 32

When the CPI determines real income it is called the ___________.

Question 33

The ________ measures the change in the prices of a fixed market basket of goods and services from one time period to another.

Question 34

Most indexes have a _____________ and a ______________ in common.

Question 35

A major disadvantage of the unweighted price index is that ___________________________.

Question 36

If we divide one dollar by the CPI and multiply this result by 100, the result is called the _________________________.

Question 37

Another name for the unweighted method of computing an index is the _________________.

Question 38

The S&P 500 is a _______________________.

Question 39

Another term for real income is _______________.

Question 40

The ________ index is computed using base year prices and quantities and current year prices and quantities together.

Question 41

An index of clothing prices for 2006 based on 1985 is to be constructed. The prices for 1985 and 2006 and the quantity consumed in 1985 are shown next. Assuming that the number sold remained constant , what is the weighted index of price for 2006 using 1985 as the base?

A) 206.7
B) 214.5
C) 48.4
D) 46.6

Question 42

Besides measuring change in the prices of goods and services, the consumer price index has a number of other applications such as:

A) to determine real disposable personal income.
B) to deflate sales or other data series.
C) to find the purchasing power of the dollar.
D) all of these

Question 43

An index number is a percent that measures the change from one period of time to another in terms of _________.

A) value
B) price
C) quantity
D) all of these

Question 44

The CPI for "educational books and supplies" in June of 2006 was 386.7 (1982-1984 = 100). Interpret this index.

A) There was no significant increase in the price of "educational books and supplies."
B) The price of "educational books and supplies" increased 386.7 times.
C) If the average price of a textbook in 1982-1984 was $25.00, the CPI for "educational books and supplies" would predict that the price of the textbook in June 2006 would be $71.68.
D) If the average price of a textbook in 1982-1984 was $25.00, the CPI for "educational books and supplies" would predict that the price of the textbook in June 2006 would be $96.68.

Question 45

The number of items produced and the price per item for the Duffy Manufacturing Company are: What is the value index of production for 2006 using 1990 as the base period?

A) 115.2
B) 72.9
C) 110.6
D) 127.1

Question 46

How can indexes be classified?

A) Price
B) Quantity
C) Value
D) Weighted or unweighted

Question 47

The CPI for "personal computers and peripheral equipment" in June 2006 was 10.7 (1982-1984 = 100). Interpret this index.

A) There was no significant increase in the price of "personal computers and peripheral equipment."
B) The price of "personal computers and peripheral equipment" increased 10.7%.
C) The price of "personal computers and peripheral equipment" decreased 89.3%.
D) If the average price of a computer in 1982-1984 was $3,000, the CPI for "personal computers and peripheral equipment" would predict that the price of a computer in June 2006 would be $893.

Question 48

Sean McCarthy earns $20,000 a year, while John Nowak earns $35,000. What is John's income as an index using Sean's income as the base?

A) 175.0
B) 75.0
C) 100.0
D) 57.1

Question 49

If the Consumer Price Index in June 2006 was about 202.9 (1982-84 = 100), what was the purchasing power of the dollar?

A) $1.00
B) $0.33
C) $0.58
D) $0.49

Question 50

What does a typical market basket of goods and services include?

A) Bread
B) Beer
C) Milk
D) All of these

Question 51

The Bureau of the Census reported that the farm population dropped from 30.5 million in 1940 to 6.5 million in 1999. What is the index for 1999 based on 1940?

A) 469.7
B) 100.0
C) 21.3
D) 78.7

Question 52

If the average age was $7.67 per hour in 1998 and $14.90 per hour last month, what is the index of hourly wages for last month based on the 1998 information?

A) 100.0
B) 186.9
C) 151.5
D) 194.3

Question 53

Real income is computed by:

A) dividing money income by the CPI and multiplying by 100.
B) dividing the CPI by money income and multiplying by 100.
C) multiplying money income by the CPI.
D) subtracting the CPI from money income.

Question 54

The Consumer Price Index in June 2006 was 159.3 (1982-84 = 100). What does this indicate about prices from 1982-84 to June 2006?

A) Rose 59.3%
B) Rose 100.0%
C) Rose 159.3%
D) Declined 159.3%

Question 55

How is the purchasing power of the dollar computed?

A) ($1/CPI) (100)
B) ($1 - CPI) (100)
C) ($1 * CPI) (100)
D) (CPI/$1) (100)

Question 56

As chief statistician for the county, you want to compute and publish every year a special-purpose index, which you plan to call Index of County Business Activity. Three series seem to hold promise as the basis for the index; namely, the price of cotton, the number of new cars sold, and the rate of money turnover for the county (published by a local bank). Arbitrarily you decide that money turnover should have a weight of 60 percent; number of new cars sold, 30 percent; and the price of cotton, 10 percent. What is the Index of County Business Activity for 1981 (the base year) and for 2006?

A) 100 for 1981, 139 for 2006
B) 139 for 1981, 100 for 2006
C) 100 for 1981, 61 for 2006
D) 100 for 1981, 100 for 2006

Question 57

The wholesale price of a straight back desk chair in 2004 was $70; in 2005, $80.50; and in 2006, $63. What were the indexes for 2005 and 2006 using 2004 = 100?

A) 115.0 and 90.0
B) 1.15 and 0.9
C) 1150.0 and 900.0
D) 87.0 and 111.1

Question 58

Prices and the number produced for selected agricultural items are: Using the Laspeyres method, what is the price index of agricultural production for 2006 (1980 = 100)?

A) 42.5
B) 129.7
C) 117.1
D) 85.3

Question 59

The take home pay of an employee working in an urban area for 1993 and 2007 are: If the CPI rose from 159 in 1993 to 210 in 2007 (1982-84 = 100), what was the "real" take home pay of the employee in 2007?

A) $5,000
B) $15,000
C) $113,200
D) $53,904

Question 60

The following is Jim Walker's income for 1995 and 2007. What was Jim's real income for 2007?

A) $37,000
B) $67,000
C) $34,387
D) $38,908

Question 61

Data for selected vegetables purchased at wholesale prices for 1995 and 2007 are shown next. What is the value index?

A) 110.3
B) 115.6
C) 108.0
D) 118.5

Question 62

Data for fuel oil and gasoline purchased at wholesale prices for 2006 and 2010 are shown next. What is the unweighted aggregate price index?

A) 116.45
B) 116.71
C) 116.67
D) 131.56

Question 63

Data for selected fruits purchased at wholesale prices for 2005 and 2009 are shown next. What is the Paasche price index?

A) 112.70
B) 179.08
C) 111.97
D) 109.36

Question 64

Data for selected fruits purchased at wholesale prices for 2005 and 2009 are shown next. What is the value index?

A) 112.70
B) 179.08
C) 111.97
D) 109.36

Question 65

Data for selected vegetables purchased at wholesale prices for 1995 and 2007 are shown next. What is the interpretation of the value index?

A) Value rose 28.8%.
B) Value rose 15.6%.
C) Value rose 17.5%.
D) Value rose 20.0%.

Question 66

Data for selected vegetables purchased at wholesale prices for 1995 and 2007 are shown next. What is Paasche's price index?

A) 98.4
B) 107.0
C) 108.0
D) 117.5

Question 67

Data for selected fruits purchased at wholesale prices for 2005 and 2009 are shown next. What is the Laspeyres price index?

A) 112.70
B) 179.08
C) 111.97
D) 109.36

Question 68

Data for fuel oil and gasoline purchased at wholesale prices for 2006 and 2010 are shown next. What is the Laspeyres price index?

A) 116.45
B) 116.71
C) 116.67
D) 131.56

Question 69

Data for selected fruits purchased at wholesale prices for 2005 and 2009 are shown next. What is your interpretation of the Laspeyres price index?

A) Value rose 9.4%.
B) Value rose 79.1%.
C) Value rose 12.7%.
D) Value rose 12.0%.

Question 70

Data for fuel oil and gasoline purchased at wholesale prices for 2006 and 2010 are shown next. What is Fisher's ideal index?

A) 116.69
B) 179.08
C) 111.97
D) 109.36

Question 71

Data for fuel oil and gasoline purchased at wholesale prices for 2006 and 2010 are shown next. What is the value index?

A) 116.45
B) 116.71
C) 116.67
D) 131.56

Question 72

Data for fuel oil and gasoline purchased at wholesale prices for 2006 and 2010 are shown next. What is Paasche's price index?

A) 116.45
B) 116.71
C) 116.67
D) 131.56

Question 73

Data for selected vegetables purchased at wholesale prices for 1995 and 2007 are shown next. What is the Laspeyres price index?

A) 98.4
B) 107.0
C) 108.0
D) 117.5

Question 74

Data for selected vegetables purchased at wholesale prices for 1995 and 2007 are shown next. What is Fisher's ideal index?

A) 107.5
B) 102.7
C) 112.8
D) 103.2

Question 75

Data for fuel oil and gasoline purchased at wholesale prices for 2006 and 2010 are shown next. What is the interpretation of the value index?

A) Value rose 16.67%.
B) Value rose 31.56%.
C) Value rose 16.71%.
D) Value rose 16.45%.

Question 76

Data for selected vegetables purchased at wholesale prices for 1995 and 2007 are shown next. What is your interpretation of the Laspeyres price index?

A) Prices rose 98.4%.
B) Prices declined 1.6%.
C) Prices rose 7.0%.
D) Prices rose 8.0%.

Question 77

Data for selected fruits purchased at wholesale prices for 2005 and 2009 are shown next. What is Fisher's ideal index?

A) 112.33
B) 179.08
C) 111.97
D) 109.36

Question 78

Data for selected vegetables purchased at wholesale prices for 1995 and 2007 are shown next. What is the unweighted aggregate price index?

A) 98.4
B) 107.0
C) 117.5
D) 128.8

Question 79

Data for selected fruits purchased at wholesale prices for 2005 and 2009 are shown next. What is the unweighted aggregate price index?

A) 112.70
B) 179.08
C) 111.97
D) 109.36

Question 80

Data for selected fruits purchased at wholesale prices for 2005 and 2009 are shown next. What is the interpretation of the value index?

A) Value rose 9.4%.
B) Value rose 79.1%.
C) Value rose 12.7%.
D) Value rose 12.0%.