Deck 15: Index Numbers

Question 1

An index of 239.2 represents a 239.2% change.

Answer 1

False

Question 2

What is the index that measures the average change in prices received in the primary markets of the United States by producers of commodities? _________________________________

Answer 2

producers price index

Question 3

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

Answer 3

True

Question 4

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

Question 5

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

Question 6

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

Question 7

An example of a weighted index is P = p_t/p_0.

Question 8

A value index method computes a simple aggregate index.

Question 9

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

Question 10

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 11

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

Question 12

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. What are these indexes usually referred to as? _______________________

Question 13

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

Question 14

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

Question 15

What is the symbol used to designate a base period price? _______

Question 16

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

Question 17

What is an index for a single commodity called? __________

Question 18

The Laspeyres method computes a weighted index.

Question 19

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

Question 20

What is the base year for the Consumer Price Index? _______

Question 21

Which method of computing index numbers has the advantage that the consumption pattern is always up-to-date? _____________________

Question 22

Which index is computed using base year prices and quantities and current year prices and quantities together? _____________

Question 23

What is a major disadvantage of the unweighted price index? ______________________________

Question 24

Which index measures the change in the prices of a fixed market basket of goods and services from one time period to another? ___________

Question 25

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

Question 26

Which method for computing a weighted price index uses current year weights? _____________

Question 27

In a weighted index, what variable is usually the weight? ________________________

Question 28

What is another term for real income? _______________

Question 29

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

Question 30

The Dow Jones Industrial Index is a ____________________.

Question 31

What is the purpose of an index? _____________________________________

Question 32

The S&P 500 is a _______________________.

Question 33

What is another name for the unweighted method of computing an index? _____________________

Question 34

Which method of computing index numbers has the disadvantage that the base period quantities or weights are realistic? _____________________

Question 35

What is the usual index number associated with the base period for the CPI? ______

Question 36

Which method for computing a weighted price index uses base year weights? _____________

Question 37

What do most indexes have in common? ________________________________

Question 38

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

Question 39

What is the CPI called when it determines real income? ___________

Question 40

What do we call a percent that measures the change in price, quantity, value or some other item of interest from one time period to another? ______________________

Question 41

Sean McCarthy earns $20,000 a year; John Nowak, $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 42

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 43

How can indexes be classified?

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

Question 44

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 $3000.00, the CPI for "personal computers and peripheral equipment" would predict that the price of a computer in June 2006 would be $893.

Question 45

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 46

How is the purchasing power of the dollar computed?

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

Question 47

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 48

Below 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 49

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 50

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 51

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 52

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 the above.

Question 53

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

A) Bread
B) Beer
C) Milk
D) All of the above

Question 54

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 55

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 the above

Question 56

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 57

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 58

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 59

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 below. Assuming that the number sold remained constant, i.e., the same number were sold in 2006 as in 1985, 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 60

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 61

Suppose your annual 2001 salary was $40,000 and your 2006 salary was $52,000. Assume the annual CPI rose from 177.1 to 202.9 during this period of time. In which year was your "real" income larger? ________

Question 62

Data for selected vegetables purchased at wholesale prices for 1995 and 2007 are shown below. What is the simple price relative for carrots?

Question 63

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

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

Question 64

Data for selected vegetables purchased at wholesale prices for 1995 and 2007 are shown below. What is the Fisher Ideal Index?

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

Question 65

Data for selected vegetables purchased at wholesale prices for 1995 and 2007 are shown below. What is the simple price relative for cabbage?

Question 66

Suppose your annual 2001 salary was $40,000 and your 2006 salary was $52,000. Assume the annual CPI rose from 177.1 to 202.9 during this period of time.
What was the purchasing power of the dollar in 2006? _______

Question 67

Data for selected vegetables purchased at wholesale prices for 1995 and 2007 are shown below. What is the simple price relative for peas?

Question 68

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

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

Question 69

Suppose your annual 2001 salary was $40,000 and your 2006 salary was $52,000. Assume the annual CPI rose from 177.1 to 202.9 during this period of time.
What was the purchasing power of the dollar in 2001? _______

Question 70

Suppose your annual 2001 salary was $40,000 and your 2006 salary was $52,000. Assume the annual CPI rose from 177.1 to 202.9 during this period of time.
What was your real income in 2001? _______

Question 71

Data for selected vegetables purchased at wholesale prices for 1995 and 2007 are shown below. 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 72

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

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

Question 73

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

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

Question 74

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

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

Question 75

Suppose your annual 2001 salary was $40,000 and your 2006 salary was $52,000. Assume the annual CPI rose from 177.1 to 202.9 during this period of time. What was your real income in 2006? _______

Question 76

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

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

Question 77

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

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

Question 78

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

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

Question 79

Data for selected vegetables purchased at wholesale prices for 1995 and 2007 are shown below. What is the simple price relative for broccoli?

Question 80

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

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