Deck 17: Index Numbers

Question 1

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 answers are correct

Answer 1

all of these answers are correct

Question 2

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

Answer 2

False

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

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

Question 5

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)1,150.0 and 900.0
D)87.0 and 111.1

Question 6

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 7

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

Question 8

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 9

An index of 239.2 represents a 239.2% change.

Question 10

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

Question 11

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

Question 12

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

Question 13

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

Question 14

A simple aggregate index compares the sum of values in the current period to the sum of values 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 Laspeyres method computes a weighted index.

Question 17

A value index method computes a simple aggregate index.

Question 18

If the average wage 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 19

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

Question 20

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 21

The take-home pay of an employee working in an urban area for 1993 and 2007 are as follows. 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 22

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 23

The number of items produced and the price per item for the Duffy Manufacturing Company are as follows. 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 24

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)It rose 59.3%.
B)It rose 100.0%.
C)It rose 159.3%.
D)It declined 159.3%.

Question 25

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 26

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 27

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 28

Data for selected vegetables purchased at wholesale prices for 1995 and 2007 are shown in the following table. What is the Paasche price index?

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

Question 29

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 30

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

A)Bread
B)Beer
C)Milk
D)All of these answers are correct.

Question 31

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 32

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

A)107.5
B)102.6
C)112.8
D)103.2

Question 33

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

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

Question 34

Prices and the number produced for selected agricultural items are as follows. 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 35

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)Any of these answers is correct.

Question 36

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 in the following table. 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 37

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 38

How can indexes be classified?

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

Question 39

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

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

Question 40

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

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

Question 41

Data for fuel oil and gasoline purchased at wholesale prices for 2006 and 2010 are shown in the following table. What is your interpretation of the Laspeyres price index?

A)Value rose 16.67%.
B)Value rose 35.56%.
C)Value rose 16.71%.
D)Value rose 16.45%.

Question 42

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

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

Question 43

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

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

Question 44

Which of the following statements is true about price-weighted indexes?
I. The Laspeyres index uses base-period quantities as weights.
II. The Paasche index tends to underweight goods whose prices have gone down.
III. The Paasche index uses current-period quantities as weights.

A)I only
B)II only
C)I and III
D)II and III

Question 45

Data for fuel oil and gasoline purchased at wholesale prices for 2006 and 2010 are shown in the following table. What is the Paasche price index?

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

Question 46

A weighted price index that uses current-period quantities as weights is known as ________.

A)Fisher's ideal index
B)the Laspeyres index
C)the Paasche index
D)the value index

Question 47

Data for selected fruits purchased at wholesale prices for 2005 and 2009 are shown in the following table. 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 48

Data for selected vegetables purchased at wholesale prices for 1995 and 2007 are shown in the following table. 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 49

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

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

Question 50

Data for selected fruits purchased at wholesale prices for 2005 and 2009 are shown in the following table. 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%.

Question 51

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

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

Question 52

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

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

Question 53

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

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

Question 54

A monthly price index that describes the changes in prices from one period to another for a "market basket" of goods and services is known as the ________.

A)Laspeyres index
B)Deflator index
C)Consumer Price Index
D)Paasche index

Question 55

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

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

Question 56

Data for selected vegetables purchased at wholesale prices for 1995 and 2007 are shown in the following table. 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 57

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

A)116.45
B)116.72
C)116.67
D)131.56

Question 58

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

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

Question 59

Data for fuel oil and gasoline purchased at wholesale prices for 2006 and 2010 are shown in the following table. 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 60

The Consumer Price Index is ________.

A)an annual price index published by the Bureau of Labor Statistics to measure the percent change in stock market indexes such as the DJIA
B)a Laspeyres index that allows consumers to determine the degree to which their purchasing power is being eroded by price increases
C)a monthly price index that measures the change in price of a fixed market basket of goods and services from one period to another
D)both a Laspeyres index that allows consumers to determine the degree to which their purchasing power is being eroded by price increases and a monthly price index that measures the change in price of a fixed market basket of goods and services from one period to another

Question 61

You are given the following information on selected food items: The Laspeyres price index when the current period is 2013 and the base year is 2006 is ________.

A)142.39
B)135.31
C)70.23
D)73.73

Question 62

The Simple Index P (simple price index)can be calculated by ________.

A)dividing a base-period price by a selected period price and multiplying the result by 100
B)dividing a given period price by a base-period price and dividing the result by 100
C)dividing a given period price by a base-period price and multiplying the result by 100
D)calculating the simple average of the price relatives

Question 63

In January 2004,the price of coffee was $0.74 per pound. By January 2011,the price of coffee had increased to $2.63. The simple index is about ________.

A)0.48
B)0.28
C)355
D)189

Question 64

A special-purpose aggregate price index that reflects the level of stock prices in the U.S. market is the ________.

A)American Stock Exchange Index
B)Consumer Confidence Index
C)Customer Satisfaction Index
D)Dow Jones Industrial Average (DJIA)