# Index Number MCQs | Multiple Choice Questions and Answers ### 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) Marshall-Edgeworth 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) Marshall-Edgeworth 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) Marshall-Edgeworth 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. Marshall-Edgeworth 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

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. P01 x P10 = 1 or P0n x Pn0 = 1

5. P01 x Q01 = 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.