7.3 - CONSTRUCTION OF AN INDEX NUMBER
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Practice Questions
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What is an index number?
💡 Hint: Think about measurements related to prices and economic values.
What does the aggregative method focus on?
💡 Hint: Consider how we calculate totals from listed values.
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Interactive Quizzes
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What is the primary purpose of an index number?
💡 Hint: Focus on what index numbers quantify regarding economic variables.
True or False: A weighted index considers the relative importance of the items in its calculations.
💡 Hint: Think about how consumer priorities might affect measurement results.
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Challenge Problems
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You are given prices of a basket of goods over three years: Year 1: $10, Year 2: $15, Year 3: $20. Calculate the average index for the three years using a weighted index with weights of 1, 2, and 3 respectively.
💡 Hint: Multiply each price by its respective weight, and divide by the total weight.
Discuss the implications of using outdated base years for price indices on economic analysis.
💡 Hint: Reflect on how rapidly changing markets impact relevance.
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