Assignment 1

Answers for these questions come from both the course content and the readings. Each question is worth one point, for a total of 20 points. Passing this module requires at least 65% (13 out of 20 correct). Email your answers to one of the course instructors (either Steve Martin or Shaoxiong Wang or Anastasiia Nosach) when you are finished.

Question 1 True or false: The Jevons index is always smaller than or equal to the Laspeyres index.

Question 2 Why is the Laspeyres index always larger than the Paasche index?

  1. Substitution bias.

  2. Quantities are measured less precisely in the Paasche index, so the sampling variation is larger.

  3. Seasonal patterns of consumption are over-estimated in the Laspeyres index.

  4. The Laspeyres index can be smaller than the Paasche index.

  5. None of the above.

Question 3 Which of the following are uses of a producer price index?

  1. Indicator of inflationary trends for producer inputs.

  2. National accounts deflator.

  3. Indicator of inflationary trends for consumer goods and services.

  4. Cyclical adjustment margin for the balance of payments.

  5. a and b.

  6. a, b, and d.

  7. All of the above.

Question 4 True or false: The Jevons index is always smaller than or equal to the Carli index.

Question 5 True or false: A consumer price index gives a measure of the overall price level faced by consumers.

Question 6 Which of the following are uses of a consumer price index?

  1. Indicator of inflationary trends for consumer goods and services.

  2. National accounts deflator.

  3. Indicator of inflationary trends for producer outputs.

  4. Indexation of wages.

  5. a and b.

  6. a, b, and d.

  7. All of the above.

Question 7 What are the three types of producer price indices?

  1. Input price, output price, transfer price.

  2. Input price, value added, consumer price.

  3. Output price, gate price, value added.

  4. Input price, output price, value added.

  5. None of the above.

Question 8 What is an elementary index?

  1. The price of raw inputs for a firm.

  2. The price indices for the lowest level in a hierarchy.

  3. The individual price quotes from respondents.

  4. The value of goods and services purchased at the lowest level in a hierarchy.

  5. None of the above.

Question 9 What is the usual ranking of the Fisher, Laspeyres, Lowe, and Paasche indices in terms of their magnitude (i.e., demand decreases when price increases)?

  1. Laspeyres ≥ Lowe ≥ Paasche ≥ Fisher.

  2. Lowe ≥ Laspeyres ≥ Fisher ≥ Paasche.

  3. Paasche ≥ Fisher ≥ Laspeyres ≥ Lowe.

  4. Fisher ≥ Lowe ≥ Laspeyres ≥ Paasche.

  5. None of the above.

Question 10 True or false: Weights for aggregating an index should be based on the sample of prices used to calculate the elementary aggregates.

Question 11 True or false: A Fisher index is seen as the best type of index because it is very timely to produce.

Question 12 Which of the following are symmetric indices?

  1. Fisher, Laspeyres, Paasche.

  2. Jevons, Lowe.

  3. Fisher, Törnqvist.

  4. Young.

  5. None of the above.

Question 13 True or false: Both the Dutot and Jevons indices are transitive.

Question 14 Weights for a producer price index should always be based on.

  1. Revenue shares.

  2. Expenditure shares.

  3. Value added.

  4. Current and future revenue shares.

  5. None of the above.

Question 15 True or false: All price indices can be categorized as arithmetic, geometric, or harmonic.

Question 16 Weights for a consumer price index can come from which sources.

  1. Scanner data.

  2. Survey of consumer spending.

  3. National accounts.

  4. Census of population.

  5. a and b.

  6. All of the above.

  7. None of the above.

Question 17 An index has a value of 90 in January and a value of 130 in May. What is the value of the index in May if January is set as the base period?

  1. 90.0.

  2. 100.0.

  3. 140.0.

  4. 144.4.

  5. 130.0.

Question 18 True or false: The Fisher index is consistent in aggregation.

Question 19 A price index has a value of 80 in March and 90 in September. What is the percent changes in price between March and September?

  1. 10%.

  2. 12.5%.

  3. -11%.

  4. None of the above.

  5. It is impossible to know without knowing the base period.

Question 20 You are trying to make an index for blue widgets and red widgets. The price relative for red widgets is 1.2 and the price relative for blue widgets is 0.9. The expenditure share on red widgets is 0.3 in the base period and 0.25 in the current period; the expenditure share for blue widgets is 0.7 in the base period and 0.75 in the current period. What is the value of the geometric Laspeyres index?

  1. 98.1.

  2. 96.7.

  3. 97.4.

  4. 99.0.

  5. 97.5.