Question 1

True or False: The changes in the price of the least consumed commodities are overly influential in a weighted aggregate price index.

Accepted Answer

In a weighted aggregate price index, the influence of a commodity's price change is proportional to its weight, which is based on its consumption level. Least consumed commodities have lower weights and thus less influence.

Question 2

TABLE 16-15
Given below are the average prices for three types of energy products for five consecutive years. 
-Referring to Table 16-15,what are the simple price indices for electricity,natural gas and fuel oil,respectively,in year 3 using year 1 as the base year?

Accepted Answer

109.25,111.74 and 115.92

Question 3

True or False: The consumer price index is a Paasche price index.

Accepted Answer

The consumer price index (CPI) is a Laspeyres price index, which measures the cost of a fixed basket of goods and services over time.

Question 4

True or False: The base period should be recent so that a price index is not severely affected by change in technology,and consumer attitudes and habits.

Accepted Answer

The base period should be recent so that it reflects current technology, consumer attitudes, and habits, which ensures that the price index is not severely affected by these changes. If an outdated base period is used, the price index may not accurately reflect the current cost of goods and services.

Question 5

TABLE 16-15
Given below are the average prices for three types of energy products for five consecutive years. 
-Referring to Table 16-15,what are the simple price indices for electricity,natural gas and fuel oil,respectively,in year 2 using year 5 as the base year?

Accepted Answer

The answer of TABLE 16-15
Given below are the average prices...

Question 6

True or False: For a price index,it is preferable to select the base period in a period of economic stability.

Accepted Answer

It is ideal to select the base period in a period of economic stability as it provides a more accurate representation of price changes over time. Choosing a base period during a period of high inflation or deflation can skew the index and make it less reliable.

Question 7

True or False: The Paasche price index has the disadvantage that current consumption quantities are usually hard to obtain.

Accepted Answer

The Paasche price index involves using current consumption quantities, which can be difficult to obtain.

Question 8

True or False: Unweighted aggregate price indices account for differences in the magnitude of prices per unit and differences in the consumption levels of the items in the market basket.

Accepted Answer

Unweighted aggregate price indices do not account for differences in the magnitude of prices per unit or differences in consumption levels. They simply calculate the average price of a market basket of goods without taking into account the relative importance of each item in the basket. Weighted price indices are necessary for accounting for these differences.

Question 9

TABLE 16-15
Given below are the average prices for three types of energy products for five consecutive years. 
-Referring to Table 16-15,what are the simple price indices for electricity,natural gas and fuel oil,respectively,in year 4 using year 1 as the base year?

Accepted Answer

The answer of TABLE 16-15
Given below are the average prices...

Question 10

True or False: The Laspeyres price index is a form of weighted aggregate price index.

Accepted Answer

The Laspeyres price index is a type of weighted aggregate price index because it takes into account the relative importance, or weights, of different goods in the market basket being measured.

Question 11

True or False: The Paasche price index uses the consumption quantities in the year of interest as the weights.

Accepted Answer

The Paasche price index uses the consumption quantities in the year of interest as the weights, while the Laspeyres price index uses the base year quantities as the weights.

Question 12

True or False: The Laspeyres price index uses the initial consumption quantities as the weights.

Accepted Answer

The Laspeyres price index uses the initial consumption quantities as the weights.

Question 13

True or False: A simple price index tracks the price of a group of commodities at a given period of time to the price paid for that group of commodities at a particular point of time in the past.

Accepted Answer

The answer of True or False: A simple price index...

Question 14

TABLE 16-15
Given below are the average prices for three types of energy products for five consecutive years. 
-Referring to Table 16-15,what are the simple price indices for electricity,natural gas and fuel oil,respectively,in year 3 using year 5 as the base year?

Accepted Answer

The answer of TABLE 16-15
Given below are the average prices...

Question 15

True or False: The more expensive commodities are overly influential in an unweighted aggregate price index.

Accepted Answer

In an unweighted aggregate price index, all commodities are given equal importance regardless of their price or demand. As a result, expensive commodities may have a larger impact on the overall index than less expensive ones, leading to an overly influential effect.

Question 16

TABLE 16-15
Given below are the average prices for three types of energy products for five consecutive years. 
-Referring to Table 16-15,what are the simple price indices for electricity,natural gas and fuel oil,respectively,in year 1 using year 5 as the base year?

Accepted Answer

The answer of TABLE 16-15
Given below are the average prices...

Question 17

TABLE 16-15
Given below are the average prices for three types of energy products for five consecutive years. 
-Referring to Table 16-15,what are the simple price indices for electricity,natural gas and fuel oil,respectively,in year 5 using year 1 as the base year?

Accepted Answer

The answer of TABLE 16-15
Given below are the average prices...

Question 18

True or False: The Paasche price index reflects more accurately the consumption cost at a point in time because it uses the consumption quantities in the initial year as the base.

Accepted Answer

The Paasche price index uses the current period's quantities as weights, not the initial year's quantities.

Question 19

True or False: The Laspeyres price index has the disadvantage that the consumption pattern in the initial period might be quite different from that in the current period and,hence,does not reflect accurately the current consumption cost.

Accepted Answer

The Laspeyres price index uses base period quantities as weights to calculate price changes, but these weights do not reflect changes in consumption patterns over time. Therefore, the Laspeyres price index may not accurately reflect current consumption costs.

Question 20

True or False: The Paasche price index is a form of unweighted aggregate price index.

Accepted Answer

The Paasche price index is a weighted aggregate price index, using current period quantities as weights.

Quiz 20: Index Numbers

True or False: The changes in the price of the least consumed commodities are overly influential in a weighted aggregate price index.

TABLE 16-15 Given below are the average prices for three types of energy products for five consecutive years. -Referring to Table 16-15,what are the simple price indices for electricity,natural gas and fuel oil,respectively,in year 3 using year 1 as the base year?

True or False: The consumer price index is a Paasche price index.

True or False: The base period should be recent so that a price index is not severely affected by change in technology,and consumer attitudes and habits.

TABLE 16-15 Given below are the average prices for three types of energy products for five consecutive years. -Referring to Table 16-15,what are the simple price indices for electricity,natural gas and fuel oil,respectively,in year 2 using year 5 as the base year?

True or False: For a price index,it is preferable to select the base period in a period of economic stability.

True or False: The Paasche price index has the disadvantage that current consumption quantities are usually hard to obtain.

True or False: Unweighted aggregate price indices account for differences in the magnitude of prices per unit and differences in the consumption levels of the items in the market basket.

TABLE 16-15 Given below are the average prices for three types of energy products for five consecutive years. -Referring to Table 16-15,what are the simple price indices for electricity,natural gas and fuel oil,respectively,in year 4 using year 1 as the base year?

True or False: The Laspeyres price index is a form of weighted aggregate price index.

True or False: The Paasche price index uses the consumption quantities in the year of interest as the weights.

True or False: The Laspeyres price index uses the initial consumption quantities as the weights.

True or False: A simple price index tracks the price of a group of commodities at a given period of time to the price paid for that group of commodities at a particular point of time in the past.

TABLE 16-15 Given below are the average prices for three types of energy products for five consecutive years. -Referring to Table 16-15,what are the simple price indices for electricity,natural gas and fuel oil,respectively,in year 3 using year 5 as the base year?

True or False: The more expensive commodities are overly influential in an unweighted aggregate price index.

TABLE 16-15 Given below are the average prices for three types of energy products for five consecutive years. -Referring to Table 16-15,what are the simple price indices for electricity,natural gas and fuel oil,respectively,in year 1 using year 5 as the base year?

TABLE 16-15 Given below are the average prices for three types of energy products for five consecutive years. -Referring to Table 16-15,what are the simple price indices for electricity,natural gas and fuel oil,respectively,in year 5 using year 1 as the base year?

True or False: The Paasche price index reflects more accurately the consumption cost at a point in time because it uses the consumption quantities in the initial year as the base.

True or False: The Laspeyres price index has the disadvantage that the consumption pattern in the initial period might be quite different from that in the current period and,hence,does not reflect accurately the current consumption cost.

True or False: The Paasche price index is a form of unweighted aggregate price index.