Practice Price Index Numbers (11.2.2.1) - Index Numbers and Moving Averages

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6 sample questions

Question 1.
What is the formula for calculating a price index number?
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Think about how to relate current prices to past prices.
Question 2.
Define Consumer Price Index (CPI).
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Focus on consumer goods!
3Question 3.
What does a price index number of 150 indicate?
- Prices have decreased by 50%
- Prices have increased by 50%
- Prices have doubled
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Remember the significance of base periods!
4Question 4.
Is the Consumer Price Index used to track producer prices? (True/False)
- True
- False
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Keep track of who the index is measuring!
Question 5.
If the price index number in Year 1 is 105 and in Year 2 is 110, calculate the percentage increase in prices from Year 1 to Year 2.
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Consider the change relative to the original value!
Question 6.
You notice that the CPI has risen from 200 to 210 over the course of a year. What can you infer about inflation or deflation in that period?
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Remember how to interpret CPI changes!

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