MCQ Questions Chapter 8 Index Numbers Class 11 Economics

Please refer to MCQ Questions Chapter 8 Index Numbers Class 11 Economics with answers provided below. These multiple-choice questions have been developed based on the latest NCERT book for class 11 Economics issued for the current academic year. We have provided MCQ Questions for Class 11 Economics for all chapters on our website. Students should learn the objective based questions for Chapter 8 Index Numbers in Class 11 Economics provided below to get more marks in exams.

Chapter 8 Index Numbers MCQ Questions

Please refer to the following Chapter 8 Index Numbers MCQ Questions Class 11 Economics with solutions for all important topics in the chapter.

MCQ Questions Answers for Chapter 8 Index Numbers Class 11 Economics

Question. Index numbers are very helpful in comparing the economic conditions of a particular group of people for ……different periods.
(a) three
(b) two
(c) four
(d) None of these

Question. In Laspeyre’s index number, the weight pertains to
(a) base year quantities
(b) current year
(c) Both (a) and (b)
(d) None of these

Question. The impact of change in the price of a commodity with little weight in the index will be
(a) small
(b) large
(c) uncertain
(d) None of these

Question. Choose the correct pair.

Codes
(a) A–(i)
(b) B–(ii)
(c) C–(iii)
(d) None of these

Question. The item having the highest weight in consumer price index for industrial workers is
(a) food
(b) housing
(c) clothing
(d) None of these

Question. Statement I An appropriate method for working out consumer price index is family budget method.
Statement II Index numbers are devices for measuring differences in the magnitude of a group of related variables.
Alternatives
(a) Statement I is correct and Statement II is incorrect
(b) Statement II is correct and Statement I is incorrect
(c) Both the statements are correct
(d) Both the statements are incorrect

Question. In general, inflation is calculated by using
(a) Wholesale Price Index
(b) Consumer Price Index
(c) Producer’s Price Index
(d) None of these

Question. Statement I Construction of index numbers only needs choosing commodity basket.
Statement II Index numbers have universal acceptance.
Alternatives
(a) Statement I is correct and Statement II is incorrect
(b) Statement II is correct and Statement I is incorrect
(c) Both the statements are correct
(d) Both the statements are incorrect

Question. The …… value of index number is a pure number.
(a) average
(b) commodity
(c) price relative
(d) All of these

Question. In most of the weighted index numbers the weight pertains to
(a) base year
(b) current year
(c) both base and current year
(d) None of these

Question. If Laspeyre’s index is 110 and Paasche’s index is 108, fisher’s index will be
(a) 100
(b) 108
(c) 109
(d) None of these

Question. Which of the following devices is used for measuring differences in the magnitude of a group of related variables?
(a) Arithmetic mean
(b) Index number
(c) Correlation
(d) Mode

Question. Which of the following index numbers is based on the assumption that all the commodities are of equal importance?
(a) Weighted index number
(b) Simple index number
(c) Both (a) and (b)
(d) None of these

Question. An index number which accounts for the relative importance of the items is known as 
(a) Weighted index
(b) Simple aggregative index
(c) Simple average of relatives
(d) None of the above 

Question. Factor Reversal Test is expressed in terms of

Assertion-Reasoning MCQs

(a) Both Assertion (A) and Reason (R) are true and Reason (R) is the correct explanation of Assertion (A)
(b) Both Assertion (A) and Reason (R) are true, but Reason (R) is not the correct explanation of  Assertion (A)
(c) Assertion (A) is true, but Reason (R) is false
(d) Assertion (A) is false, but Reason (R) is true

Question. Assertion (A): A better way to estimate GDP accurately is to deflate input and output prices through separate indices.
Reason (R): When output prices move relatively faster than the input prices, the single deflation method overestimates GDP.

Question. Assertion (A): Wholesale price index is used to measure the changes in the prices of goods that impacts individual.
Reason (R): Positive value of index number indicates rise in general price levels.

Question. Assertion (A): Value index is based upon both price and quantity.
Reason (R): Value is calculated by the product of price and quantity.

Question. Assertion (A): Index number serves as the barometer for measuring the value of money in an economy.
Reason (R): Index numbers have universal acceptance thus can be applied in any case.

Question. Assertion (A): Fisher’s method of index number is considered as ideal weighted method of index numbers.
Reason (R): Fisher’s method passes all statistical tests of time and factor reversal.

Case Based MCQs
1. Read the following case study graph and answer the question

Question. As per the given graph, rising Sensex indicates ………… .
(a) growth of economy
(b) growth of investors profit
(c) inflow of foreign currency
(d) All of the above

Question. The given graph shows 0.64% increase, what does it indicate?
(a) Rise in number of stocks
(b) Rise in stock prices
(c) Fall in stock price
(d) None of these 

Question. Index number is always expressed in terms of…….
(a) percentage
(b) proportionate
(c) Both (a) and (b)
(d) None of these

Question.……… type of average is used to calculate the value of index number.
(a) Simple
(b) Weighted
(c) Proportionate
(d) Both (a) and (b)

Question. Which year is considered as the base year for constructing Sensex in India?
(a) 1978-79
(b) 2000-01
(c) 2004-05
(d) 2011-12

Question. Which year shows a decrease in stock price as per the given graph?
(a) 2017
(b) 2018
(c) 2019
(d) 2020

2. Direction Read the following case study and answer the questions
We frequently see index numbers, such as the Consumer Price Index (CPI), in our daily life. Economists often use the index numbers to compare values measured at different points in time. Using an index can make quick comparisons easy. The index numbers have become a widely accepted statistical device for measuring business activity changes. A typical use of the index number technique in business is to summarize complex situations with a single performance index so that a dashboard (or report) would have enough space to show all KPIs. An index number is used to measure changes in the magnitude of a variable or group of variables regarding time, geographical location, or other characteristics such as profession. IT professionals who need to analyse economic and business activities, but have limited experience in statistics, want to learn how to construct and interpret performance indexes. Index numbers are also not free from criticism as its base year and commodity selection requires a lot of attention and expert attention.

Question. Application of index numbers which is based on data related to different time period is known as ……… .
(a) Time series data
(b) Temporal data
(c) Inter-temporal data
(d) All of these

Question. Index numbers can be used in which of the following fields?
(a) Geographical areas
(b) Change in magnitude of a variable
(c) Change in time periods
(d) All of the above

Question. Economists often use the index numbers to ……….. values measured at different points in time.
(a) measure
(b) change
(c) compare
(d) All of these

Question. Choose the correct statement from given below
(a) Index numbers are cent percent accurate
(b) There is null possibility of biasness in case of index numbers
(c) Index number is based upon all the items given in the data
(d) All of the above

Question. Assertion (A): Selection of incorrect base leads to mis-leading conclusion.
Reason (R): A year with high fluctuations in prices should not be considered as base year.
Alternatives
(a) Both Assertion (A) and Reason (R) are true and Reason (R) is the correct explanation of Assertion (A).
(b) Both Assertion (A) and Reason (R) are true, but Reason (R) is not the correct explanation of Assertion (A)
(c) Assertion (A) is true, but Reason (R) is false 
(d) Both are false 

Question. Which of the following problems comes in the construction of index numbers?
(a) Selection of base year
(b) Selection of commodities
(c) Selection of quantities
(d) All of these