Free Index Numbers 01 Practice Test - 11th Grade - Commerce 

Question 1

(I) The SENSEX is a free-float market-weighted stock market of 30 well established and financially sound companies listed on Bombay stock exchange.
(II) The NIFTY 50 is NSE’s benchmark broad based stock market index for the Indian equity market. It represents the simple average of 50 Indian company stocks in 12 sectors.

A.

Statement I and II are true

B.

Statement I is false and Statement II is true

C.

Statement I is true and Statement II is false

D.

Statement I and II are false

SOLUTION

Solution : C

SENSEX and NIFTY 50 are the weighted average stock markets of 30 and 50 blue chip stocks respectively.

Question 2

In the wholesale price index of India, highest weightage is given to______.

A.

Primary articles

B.

Fuel, power, light and lubricants

C.

Manufacturing

D.

None of these

SOLUTION

Solution : C

Manufacturing is given the highest weightage of approx 63% followed by primary articles(22%) and Fuel, power, light & lubricants(14%).

Question 3

The drawbacks of the simple aggregative method are:

(I) The items with large unit prices have greater influence on the index.

(II) No weightage is given to the relative importance of the items.

A.

Both statements (I) & (II) are true

B.

Statement (I) is false but statement (II) is true

C.

Both statements (I) & (II) are false

D.

Statement (I) is true but statement (II) is false

SOLUTION

Solution : A

Simple aggregative method doesn't consider the relative importance of the items.  Index is influenced by the items with the large unit prices.

Question 4

The CPI number for urban non-manual employees can represent the changes in the cost of living of the President of India.

A.

True

B.

False

SOLUTION

Solution : A

True.

The President of India resides in urban area and is an non-manual government employee, so he will come under the category of urban non-manual employees and hence his cost of living can be reflected in CPI UNME.

Question 5

Construction of index of industrial production(IIP) in India involves _____.

A.

Classification of industries

B.

Classification of consumer class

C.

Information about family expenditure or budget

D.

Weightage given to different industries based on their relative importance

SOLUTION

Solution : A and D

IIP requires classification of industries based on their relative importance, weights are given. Classification of consumer class and information about family expenditure or budget are covered under CPI and not IIP.

Question 6

When the stock market goes up, an investor in the companies listed on it will find his investments ___.

A.

Appreciating in value

B.

Depreciating in value

C.

Remaining same

D.

Can’t say

SOLUTION

Solution : D

It depends on in which stocks he has made his investment and their weightage in that index/stock market. There could be a possibility that the particular stocks in which the investor has invested are in red despite the overall index in green.

Question 7

An ideal index number would be one which takes into account as weights ______.

A.

Prices of both base and current year

B.

Quantities of both base and current year

C.

Prices and quantities of both base and current year

D.

Prices of current year

SOLUTION

Solution : C

Prices and quantities of both base and current year when taken into consideration give a more consistent result as compared to other indexes deploying either only prices or quantities.

Question 8

(I) A rising price index implies a growing level of economic activity.

(II) Simple index number can be constructed only by the simple aggregative method.

A.

True, True

B.

False, False

C.

True, False

D.

False, True

SOLUTION

Solution : B

The rise in price index could be due to other reasons as well and not necessarily due to higher economic activity.

As for statement (II), simple average of price relatives is another method.

Question 9

The advantages of using index numbers is/(are) ____.

A.

Information about the change in standard of living

B.

Useful to business community

C.

Information regarding foreign trade

D.

Useful to government

SOLUTION

Solution : A, B, C, and D

All the above mentioned options are advantages of index numbers.

Question 10

The CPI is slightly different from the cost of living index in that the latter includes aspects such as environment, education, health apart from CPI and that’ why CPI is sometimes called “conditional” cost of living index.

A.

True

B.

False

SOLUTION

Solution : A

Yes, the CPI is slightly different from the cost of living index due to the mentioned reason.