Index Number MCQs
(Multiple Choice Questions
and Answers)
For B.Com/CA/CMA/CS Foundation exam
1. Index number was first constructed
in:
a)
1750
b)
1760
c) 1764
d)
1770
2. Index number is specialised average designed to measure the change in a group of related variables over a period of time.
3. An index number calculated with a
single variable is called univariate index.
4. When an index number is constructed
from a group of variables is considered a composite index.
5. Most widely used weighted index is:
a) Laspeyres
Index
b)
Paasche’s Index
c)
Fisher’s ideal Index
d)
MarshallEdgeworth Index
6. The best average for constructing
an index number is:
a) AM
b) GM
c) HM
d) All of the
above
7. The time reversal test is satisfied
by:
a) Fisher’s
Ideal Index
b)
MarshallEdgeworth Method
c) Simple
GM of price relatives
d) All
of the above
8. The factor reversal test is
satisfied by:
a)
Fisher’s Ideal Index
b)
MarshallEdgeworth Method
c) Simple
GM of price relatives
d) All of
the above
Hint: Name of the test and methods
satisfying them:
Name of test 
Methods satisfying the test 
1. Time
reversal test 
Fishers
ideal index Simple
GM of price relatives Weighted
GM of price relatives if weights are fixed. MarshallEdgeworth
method Aggregates
with fixed weights. 
2.
Factor reversal test 
Fishers
ideal index 
3.
Circular test 
Simple
aggregative method and fixed weight aggregative method 
4. Unit
test 
All
methods of index number except simple aggregative index. 
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9. Circular test is satisfied by:
a) Fisher’s
ideal index
b) Paasche’s
index number
c)
Simple aggregative method
d)
Laspeyres Index
10. Fisher’s index number is based on:
a) AM of
Laspeyres and Paasche’s Index
b) GM
of Laspeyres and Paasche’s Index
b) HM of
Laspeyres and Paasche’s Index
d) None of
the above
11. Match the following
Paasche’s
index is based on 
Current
year quantities 
Laspeyres
index is based on 
Base
year quantities 
Laspeyres
index satisfied 
Unit test 
Fishers’
Price index satisfied 
Time and
factor reversal test 
Fisher’s
Quantity index satisfied 
Factor reversal
test 
12. Purchasing power of money is:
a) Reciprocal
of price index number
b) Equal
to price index number
c) Unequal
to price index number
d) All of
the above
13. Consumer price index is equal to:
a) Laspeyres price
index
b) Paasche’s price index
c) Fisher’s ideal index
d) Bowley’s price index
14. The cost of living index (CLI) is always:
a) Price index
b) Quantity Index
c) Value index
d) Weighted index
15. Bowley’s index number is based on:
a) AM
of Laspeyres and Paasche’s Index
b) GM of
Laspeyres and Paasche’s Index
b) HM of
Laspeyres and Paasche’s Index
d) None of
the above
16. Cost of living index (CLI) numbers are also used to find real wages by the process of:
a) Deflating of
index number
b) Splicing of index number
c) Base shifting
d) None of the above
17. Circular test is an extension of:
a) Time reversal
test
b) Factor reversal test
c) Circular test
d) Unit test
Hint: Addition
important points
1. Only Fisher’s index number is the
ideal index number which satisfied time reversal and factor reversal test.
2. Fisher’s index is the GM of
Laspeyre’s and Paasche’s index number.
3. Base year index = 100
4. P_{01} x P_{10} =
1 or P_{0n} x P_{n0} = 1
5. P_{01} x Q_{01} =
Value index number
6. Net monthly income of an employee
was Rs.800 pm in 1980. The consumer price index number was 160 in 1980. It
rises to 200 in 1984. Calculate DA and his wages.
Ans: DA = 40/160*800 = 200 and his
wages should be = 200/160*800 = 1000
7. Index number in 2000 is 140 which
increase to 200 in 2010. What does it mean?
Ans: It means prices are increased by 60% in 2010 as compared to 2000.
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