Index Numbers and Time Series MCQs 2026

An index number measures

1. A only absolute levels without comparison ✓
2. B relative change in a variable or group of variables over time or space ✓
3. C only correlation r ✓
4. D only ANOVA F ratios ✓

Laspeyres price index uses weights from

1. A current period quantities only ✓
2. B only geometric means of prices ✓
3. C only regression residuals ✓
4. D the base period quantities ✓

Paasche price index uses weights from

1. A base period quantities only ✓
2. B only fixed 100 weights ✓
3. C only block totals ✓
4. D the current period quantities ✓

Fisher ideal index is

1. A the arithmetic mean of price relatives only ✓
2. B equal to Paasche only always ✓
3. C the sum of Laspeyres and Paasche ✓
4. D the geometric mean of Laspeyres and Paasche indexes ✓

Base period in index numbers is

1. A always the latest year ✓
2. B the period with highest price only ✓
3. C the period assigned index value 100 (or 1) for comparison ✓
4. D the ANOVA grand mean ✓

Price index tracks changes in

1. A only physical output quantities without prices ✓
2. B prices of a basket of goods ✓
3. C only wages without prices ✓
4. D only ranks ✓

Quantity index tracks changes in

1. A only monetary values at current prices ✓
2. B only seasonal indices ✓
3. C physical volume or quantity produced/consumed ✓
4. D only residual variance ✓

Weighted index numbers are preferred because

1. A items differ in economic importance ✓
2. B every item must receive equal weight ✓
3. C weights eliminate trend ✓
4. D weights equal correlation r ✓

Simple (unweighted) price index may use

1. A only Laspeyres quantities ✓
2. B arithmetic mean of price relatives ✓
3. C only regression slopes ✓
4. D only Mann–Whitney ranks ✓

Chain index links

1. A only one base forever ✓
2. B only ANOVA blocks ✓
3. C period-to-period relatives rather than fixing one distant base ✓
4. D only non-parametric signs ✓

Consumer Price Index (CPI) conceptually measures

1. A only wholesale factory prices ✓
2. B only stock dividends ✓
3. C only block effects ✓
4. D average change in prices paid by consumers for a market basket ✓

Wholesale Price Index (WPI) focuses on

1. A prices at wholesale/producer stage ✓
2. B retail consumer baskets only ✓
3. C only wage rates ✓
4. D only moving-average seasonality removal ✓

A time series is

1. A only cross-sectional survey at one date ✓
2. B only ANOVA treatment table ✓
3. C only correlation matrix ✓
4. D data recorded sequentially over time ✓

Four components of classical time series decomposition are

1. A only mean and variance ✓
2. B only regression residuals ✓
3. C only blocking factors ✓
4. D trend, seasonal, cyclical and irregular ✓

Trend component represents

1. A repeating within-year pattern only ✓
2. B long-term general movement in the series ✓
3. C random noise only ✓
4. D only Laspeyres base weights ✓

Seasonal component represents

1. A long-term drift only ✓
2. B one-time shocks only ✓
3. C only sampling error in CRD ✓
4. D regular periodic fluctuations within a year (or fixed period) ✓

Cyclical component refers to

1. A daily noise ✓
2. B fluctuations over periods longer than one year, often economy-wide ✓
3. C fixed 12-month seasonality only ✓
4. D the base year ✓

Irregular (random) component captures

1. A the deterministic trend only ✓
2. B fixed seasonal indices exactly ✓
3. C unpredictable short-term variation ✓
4. D the Laspeyres formula ✓

Simple moving average smooths a series by

1. A averaging values over a fixed window of consecutive periods ✓
2. B squaring each observation ✓
3. C using only base-year weights ✓
4. D ranking observations ✓

Centered moving average is used especially to

1. A compute Pearson r only ✓
2. B test homogeneity of variance ✓
3. C replace randomization in CRD ✓
4. D estimate trend when seasonality is present ✓

Weighted moving average assigns

1. A equal weight only always ✓
2. B different weights to observations in the window ✓
3. C zero weight to all but one point always ✓
4. D only ranks ✓

Seasonal indices express

1. A only long-run slope ✓
2. B typical percentage departure from trend in each season ✓
3. C only block means ✓
4. D only K–S distance ✓

Deseasonalizing data means

1. A adding seasonality ✓
2. B converting to Laspeyres only ✓
3. C removing estimated seasonal effects to reveal trend and irregular ✓
4. D replacing Y with ranks ✓

Ratio-to-moving-average method estimates seasonal factors by

1. A multiplying by Paasche only ✓
2. B using sign test ✓
3. C dividing actual values by moving-average trend values ✓
4. D computing SS_between ✓

Linear trend equation Yₜ = a + bt estimates trend using

1. A least squares over time t ✓
2. B only sign test ✓
3. C only CRD blocking ✓
4. D only Fisher index ✓

Semi-average method splits the series into halves and uses

1. A Wilcoxon ranks ✓
2. B averages of each half to fit a trend line ✓
3. C ANOVA F only ✓
4. D K–S CDF ✓

Shifting base of an index means

1. A changing the reference period to a more recent one ✓
2. B eliminating weights ✓
3. C fixing r at zero ✓
4. D dropping seasonal component ✓

Time reversal test (Fisher) requires

1. A only Paasche to satisfy always ✓
2. B price index formula gives reciprocal when time periods are reversed ✓
3. C only block SS to match ✓
4. D only runs randomness ✓

Factor reversal test requires

1. A only Laspeyres price index passes always ✓
2. B product of price and quantity indexes equals value index ✓
3. C only seasonal index passes ✓
4. D only sign test passes ✓

Cost of living index aims to measure

1. A only factory output volume ✓
2. B only correlation ✓
3. C only error MS ✓
4. D change in expenditure needed to maintain a standard of living ✓

Deflating nominal values uses

1. A Paasche quantity only without prices ✓
2. B sign test ✓
3. C a price index to express values in constant-price terms ✓
4. D LSD comparison ✓

Inflation is often measured by

1. A only moving-average window length ✓
2. B only block variance ✓
3. C percentage change in a general price index such as CPI ✓
4. D only partial correlation ✓

Laspeyres index tends to

1. A overstate price change when consumers substitute away from dearer goods ✓
2. B understate always when substitution occurs ✓
3. C equal Paasche always ✓
4. D ignore base quantities ✓

Paasche index tends to

1. A overstate always ✓
2. B use only base weights ✓
3. C understate price change due to substitution at current quantities ✓
4. D ignore current quantities ✓

Fisher index is considered ideal because it

1. A uses only unweighted relatives ✓
2. B satisfies time reversal and factor reversal tests ✓
3. C ignores quantities ✓
4. D equals Laspeyres always ✓

Link relatives chain

1. A each period to the immediately preceding period ✓
2. B only to a distant fixed base ✓
3. C only through ANOVA ✓
4. D only via sign test ✓

Fixed-base index compares every period to

1. A only the previous period always ✓
2. B one constant base period ✓
3. C only block means ✓
4. D only residual e ✓

Limitations of index numbers include

1. A they are always unique and unbiased ✓
2. B choice of basket, weights and base can affect results ✓
3. C they eliminate seasonality automatically ✓
4. D they prove causation ✓

Detrending a series removes

1. A all data permanently ✓
2. B only irregular only ✓
3. C estimated trend to study cyclical or seasonal patterns ✓
4. D only base year ✓

Exponential smoothing assigns

1. A equal weights to all history ✓
2. B only ranks ✓
3. C declining weights to older observations in computing forecasts ✓
4. D only block labels ✓

Stationarity in time series roughly means

1. A statistical properties do not change over time ✓
2. B trend always increases ✓
3. C seasonality is absent always ✓
4. D variance is infinite ✓

Autocorrelation in time series measures

1. A only cross-sectional Pearson r ✓
2. B only Mann–Whitney U ✓
3. C only LSD ✓
4. D correlation of the series with its own lagged values ✓

Lag k value means

1. A the value k periods before the current time ✓
2. B the seasonal index only ✓
3. C the block mean ✓
4. D the grand mean in ANOVA ✓

Seasonal adjustment in official statistics aims to

1. A remove predictable seasonal movement for trend analysis ✓
2. B add noise ✓
3. C replace Fisher with Laspeyres only ✓
4. D eliminate all variation ✓

Composite index combines

1. A several items or sub-indexes into one overall measure ✓
2. B only one commodity always ✓
3. C only regression intercept ✓
4. D only one ANOVA factor ✓

Aggregate method in index construction uses

1. A only ranks ✓
2. B only runs ✓
3. C total price or quantity of the basket directly ✓
4. D only partial F ✓

Average of price relatives computes index from

1. A mean of individual item price ratios ✓
2. B only quantity weights from future ✓
3. C only SS_within ✓
4. D only Wilcoxon statistic ✓

Moving average length for monthly seasonal data is often

1. A 12 months ✓
2. B 3 months only always ✓
3. C equal to sample size n ✓
4. D zero ✓

Irregular fluctuations may arise from

1. A deterministic seasonal pattern ✓
2. B fixed trend slope only ✓
3. C Laspeyres base alone ✓
4. D strikes, wars, policy shocks or measurement error ✓

Index number problem of choice of average means

1. A all formulas always agree ✓
2. B indexes never use weights ✓
3. C indexes replace time series ✓
4. D different formulas (L, P, F) give different answers ✓