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Index Numbers

Question

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Suppose in the first week of a month, the rate of inflation is 5% and it falls from 5% to 4% in the second week. What should it be interpreted. Ram says it should be interpreted as a fall in the price level. Do you agree with him?

Solution

No, I do not agree with him. It is not fall in the price level. It is only a fall in the speed at which prices tend to rise.

Some More Questions From Index Numbers Chapter

In most of the weighted index numbers the weight pertains to:

The impact of change in the price of a commodity with little weight in the index will be:

A consumer price index measures changes in:

The item having the highest weight in consumer price index for industrial workers is:

In general, inflation is calculated by using:

The item having the highest weight in consumer’s price index for industrial workers is:

consumer price index measures changes in:

The wholesale price index.

D.A. paid to the workers is based on:

Why do we need an index number?

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