Expert Answers

Question 1
A firm has sales in consecutive years as follows:
Year                Sales
1                      $500,000
2                      $400,000
3                      $450,000
4                      $600,000
5                      $580,000
Using year 1 as a base year, which of the following statements is true?
A. The index number for year #3 is 90.
B. The index number for year #4 is 133.33.
C. Year #2 sales are 80% of the base year level.
D. Both A and C

2 The index that measures price changes in domestic output for a number of industries is called:
A. the consumer price index.
B. the industrial production index.
C. the producer price index.
D. an economic index.

 

3 Use the following information, and 2000 as a base year, to answer questions 3-5.
Price Per Unit Quantity Item          2000                2001                2000                2001
            A                                             1.00                 1.10                 2                      4          B                                                5.50                 6.00                 2                      3
An unweighted, unaggregated price index would give a value of:

A. 91.
B. 100.
C. 109.
D. 119.

4 A Laspeyres price index would give a value of:
A. 69.3.
B. 101.4.
C. 109.2.
D. 169.3.

5 A Paasche price index yields a value of:
A. 89.2.
B. 109.2.
C. 119.6.
D. 172.3.
6
The Paasche index is a weighted aggregate price index that uses weights based on:
A. base period quantities.
B. the ratio of base period quantities to current period quantities.
C. current period quantities.
D. the ratio of base period prices to current period prices.

Question 7
Answer questions 7-11 based on the following information:
The following data was gathered for domestic consumption (C, in millions of tons) and price per unit (P) of basic foodstuffs (base year is 2001):
2001                2002                2003                                                                                                                Type               P                      C                     P                      C                     P                        C                                                                                                         Wheat             2                      10                    3                      11                    5                      14                                                                                                                                            Barley             3                      7                      2                      10                    3                      12                                                                                                                                            Corn                1                      12                    1                      13                    2                      14
The Laspeyres price index for 2002 is:
A. 105.66.
B. 124.53.
C. 179.24.
D. 253.83.
8
The Laspeyres price index for 2003 is:
A. 105.66.
B. 120.00.
C. 141.17.
D. 179.24.

Question 9
The Paasche price index for 2002 is:
A. 101.54.
B. 116.07.
C. 120.00.
D. 124.53.

Question 10
The Paasche price index for 2003 is:
A. 141.05.
B. 171.79.
C. 179.24.
D. 252.83.
Question 11
A value index for the information would be:

A. 147.17.
B. 174.26.
C. 179.4.
D. 252.83.
Question 12
The consumer price index:
A. may be used to determine real disposable personal income levels.
B. is an indicator of the rate of inflation in the economy.
C. illustrates the extent to which purchasing power has been eroded since the base year.
D. All of the above
Question 13
GNP in country X for 2002 is $800 billion. If the consumer price index is currently 125, real GNP, in billions, for 2002 was:
A. $675.
B. $640.
C. $925.
D. $1,000.
14
The GNP in country Y in 2002 was $340 billion; if real GNP was 425, the price deflator for 2002 is:
A. 42.5.
B. 80.
C. 100.
D. 125.

Question 15
If the average hourly earnings in mining in 1978 was $7.67 and for the most recent month was $14.90, what is the index of hourly earnings for the most recent month based on 1978?
A. 100.0
B. 186.9
C. 151.5
D. 194.3
16
The Bureau of the Census reported that the farm population dropped from 30.5 million in 1940 to 6.5 million in 1999. What is the index for 1999 based on 1940?
A. 469.7
B. 100.0
C. 21.3
D. 78.7

Question 17
The number of items produced and the price per item for the Duffy Manufacturing Company are:                                     Price               Production                                                                                                                 1990                2000                1990                2000
Shear pins (box)         $3                    $4                    10,000             9,000
Cutting compound (lb.)$1                  $5                    600                  200
Tie rods (each)           $10                  $8                    3,000               5,000
What is the value index of production for 2000 using 1990 as the base period?
A. 115.2
B. 72.9
C. 110.6
D. 127.1
18
An index number is a percent that measures the change from one period of time to another in terms of:

A. value
B. price
C. quantity
D. all of the above
19
Which index is computed using base year prices and quantities and current year prices and quantities together?
A. Laspeyers
B. Paasche
C. Value
D. Consumer Price
20
The Consumer Price Index in June 1998 was 248.4 (1982-84 = 100). What does this indicate about prices from 1982-84 to June 1998?
A. Rose 248.4%
B. Rose 548.4%
C. Rose 148.4%
D. Declined 148.4%