# Free Index Numbers 02 Practice Test - 11th Grade - Commerce

### Question 1

(I) The change in any price is reflected in an index number.

(II) The wholesale price index can be used to measure the monetary and real value of national income and expenditure.

True, True

True, False

False, False

False, True

#### SOLUTION

Solution :D

The change in any price may or may not be reflected in a price index number as such index reflects the change in terms of averages. The wholesale price index can be used to measure the monetary and real value of national income and expenditure.

### Question 2

Construct a price index for the following using Average of price relative method.

ItemsHKLMNOPrice in 2008203010254050Price in 2003253015354555

122.92

100.92

99

111.92

#### SOLUTION

Solution :A

P01=∑P1P0n∗100=25203030+1510+3525+4540+55506∗100

=1.25+1+1.5+1.4+1.125+1.16∗100

=7.3756∗100=122.92

### Question 3

Index of industrial production(IIP) in India is based on prices of goods produced.

True

False

#### SOLUTION

Solution :B

IIP in India is based on the quantity of production of goods and not the price.

### Question 4

The CPI for industrial workers and agricultural labourers are published by Central Statistical Organisation. The Labour Bureau publishes the CPI number of urban non manual employees. This is necessary because their typical consumption baskets contain many dissimilar items.

True

False

#### SOLUTION

Solution :B

False. The CPI for industrial workers and agricultural labourers are published by Labour Bureau and not by the Central Statistical Organisation. On the other hand, The Central Statistical Organisation publishes the CPI number of urban non manual employees.

### Question 5

Under the index of industrial production, highest weightage is given to _____.

Mining

Manufacturing

Electricity

None

#### SOLUTION

Solution :B

Manufacturing is given about 79% weightage.

### Question 6

What is the rate of inflation for the year 2014 if the CPIs for the years 2013 and 2014 are 123 and 157 respectively?

13.43

27.64

19.87

23.06

#### SOLUTION

Solution :B

Given, CPI in 2013 = 123

CPI in 2014 = 157

Rate of inflation (%) = [(CPI in 2014 – CPI in 2013)CPI in 2013]∗100

=[(157–123)123]∗100

=(34123)∗100=27.64

### Question 7

Which of the following following is the most important consideration for the construction of an index number?

#### SOLUTION

Solution :A

The most significant aspect of the construction of index numbers is its purpose of study.

### Question 8

An employee currently earns a salary of Rs.15,000 per year and his salary in the base year of 1990 is Rs.3,000 per year. What should be the raise in his salary in order to maintain the same standard of living with time if the CPI today is 500?

0

Rs.15,000

Rs.5,000

None of these

#### SOLUTION

Solution :A

Given, CPI = 500

Current Salary = Rs.15,000

Base salary = Rs.3,000

Since, CPI has become 5 times its value (100) at the base year of 1990.

Therefore, the salary should be commensurate i.e. it should also be 5 times of his salary in 1990.

⇒ S01 = 5×3,000 = Rs.15,000

⇒ Required increase in salary = 15,000 – 15,000 = Rs. 0

⇒ No raise is required.

### Question 9

The purchasing power of money is inversely proportional to the Consumer Price Index.

True

False

#### SOLUTION

Solution :A

CPI is inversely proportional to the purchasing power of money.

### Question 10

Bombay Stock exchange consists of 30 stocks which represent 13 sectors of the economy and the companies listed are leaders in their respective industries.

True

False

#### SOLUTION

Solution :A

Bombay Stock exchange consists of 30 stocks