4.1.3 Uses of index numbers

• What are index numbers used to track?

  Changes in a variable
• Match the index number with its description:

  Price Index ↔️ Measures changes in the general price level over time

  Quantity Index ↔️ Measures changes in the physical volume of production or sales over time

  Value Index ↔️ Measures changes in the total monetary value of production or sales over time
• A price index measures changes in the general price level.


  True
• Index numbers compare the current value of a variable to a base value, which is typically set to 100.
• A price index is used to track inflation and the cost of living.
• What does the Value Index measure in macroeconomic analysis?

  Monetary value of production
• What are index numbers useful for in economic analysis?

  Comparing data and tracking trends
• Index numbers enable economists to compare and analyze economic trends by converting data to a common base

  True
• The Consumer Price Index (CPI) is used to track inflation rates and the cost of living
• Index numbers are calculated by comparing the current value of a variable to a base value.
• What are index numbers useful for in economics?

  Comparing economic data
• Steps to calculate an index number:

  1️⃣ Identify the base year value

  2️⃣ Determine the current year value

  3️⃣ Calculate the ratio of current to base value

  4️⃣ Multiply the ratio by 100
• A quantity index is used to track inflation.

  False
• The Price Index measures changes in the general price level and is used to track inflation
• Index numbers allow economists to compare economic trends over different time periods by converting data to a common base


  True
• What is the primary purpose of using index numbers in economics?

  Track changes in variables
• One limitation of index numbers is that choosing an atypical base year can distort the comparison over time
• A price index measures changes in the general price level over time.


  True
• The purpose of using index numbers is to track changes in economic variables over time.
• What is a key benefit of using index numbers in economic analysis?

  Identifying patterns and trends
• What does understanding different types of index numbers allow for?

  Comprehensive economic analysis
• The Quantity Index measures changes in the physical volume of production or sales, used to monitor economic output and activity
• Index numbers are statistical measures used to track changes in a variable over time, comparing it to a base value of 100
• Match the type of index number with its purpose:

  Price Index ↔️ Track inflation

  Quantity Index ↔️ Monitor economic output

  Value Index ↔️ Compare revenue and expenditure
• What does the Consumer Price Index (CPI) measure?

  General price level for consumers