Negative Questions MCQs for Sub-Topics of Topic 14: Index Numbers & Time-Based Data

Question 1. Which of the following is NOT a fundamental characteristic of an index number?

(A) It is a statistical device.

(B) It measures relative changes.

(C) It is expressed in the original units of measurement.

(D) It is used for comparison over time or space.

Question 2. Which of the following is NOT a typical purpose or use of index numbers?

(A) Measuring changes in the general price level.

(B) Comparing industrial production volumes.

(C) Determining the absolute cost of a single commodity.

(D) Adjusting monetary values for inflation (deflation).

Question 3. When selecting a base period for index number construction, which of the following is NOT a desirable criterion?

(A) It should be a normal period, free from extreme events.

(B) It should be a period for which reliable data is easily available.

(C) It should be the period with the highest values in the series.

(D) It should be a recent period for relevance.

Question 4. If the index number for the current period is 110 with the base period index set to 100, which of the following is NOT true?

(A) The value has increased by 10% compared to the base period.

(B) The current period value is 110% of the base period value.

(C) The current period value is 10 units greater than the base period value.

(D) The change is a relative change.

Question 5. Consider a price relative for commodity X which is 90 in the current period (base=100). Which of the following statements is NOT correct?

(A) The price of commodity X has decreased compared to the base period.

(B) The price of commodity X in the current period is 90% of its base period price.

(C) The price of commodity X has decreased by 10% compared to the base period.

(D) The price of commodity X in the current period is $\textsf{₹}90$.

Question 6. Which of the following is NOT a type of relative commonly used in index number construction?

(A) Price Relative

(B) Quantity Relative

(C) Value Relative

(D) Quality Relative

Question 7. Index numbers are dimensionless. Which of the following is NOT a consequence of this property?

(A) They do not carry units of measurement.

(B) They can be easily compared across different types of variables (prices, quantities, etc.).

(C) The base index value is set to 100 by convention.

(D) They measure absolute changes in value.

Question 8. Which of the following statements about the base period and current period is NOT accurate?

(A) The base period is the reference period.

(B) The current period is the period under review or calculation.

(C) The base period must always precede the current period chronologically.

(D) The index number for the current period is calculated relative to the base period.

Question 9. Which of the following is NOT a common application area for index numbers in economics?

(A) Measuring inflation.

(B) Tracking industrial production growth.

(C) Forecasting weather patterns.

(D) Adjusting wages for cost of living changes.

Question 10. If the quantity relative for good Y in 2024 (base 2020) is 110, which statement is NOT correct?

(A) The quantity of good Y in 2024 is 110% of the quantity in 2020.

(B) The quantity of good Y has increased by 10% from 2020 to 2024.

(C) The quantity of good Y in 2020 was 110 units.

(D) The ratio of the quantity in 2024 to 2020 is 1.1.

Question 1. Which of the following is NOT a simple method for constructing index numbers?

(A) Simple Aggregate Method.

(B) Simple Average of Price Relatives Method.

(C) Weighted Aggregate Method.

(D) Simple Average of Quantity Relatives Method.

Question 2. In the Simple Aggregate Method for a price index, which of the following is NOT involved in the calculation?

(A) Sum of prices in the current period.

(B) Sum of prices in the base period.

(C) Quantities of commodities.

(D) Multiplication by 100.

Question 3. Which of the following is NOT a limitation of the Simple Aggregate Method for price index?

(A) It is affected by the units of measurement of prices.

(B) It fails to consider the relative importance of different commodities.

(C) It gives equal weight to the percentage change of each commodity.

(D) A commodity with a high absolute price may dominate the index.

Question 4. In the Simple Average of Price Relatives Method, which of the following is NOT a correct way to average the relatives?

(A) Using the Arithmetic Mean.

(B) Using the Geometric Mean.

(C) Using the Median.

(D) Using the Harmonic Mean.

Question 5. Which of the following statements about the Simple Average of Price Relatives Method is NOT true?

(A) It is not affected by the units in which prices are quoted.

(B) It gives equal importance to the percentage change of each commodity.

(C) It requires quantity data for calculation.

(D) It can be heavily influenced by extreme price relatives when using the Arithmetic Mean.

Question 6. Consider two commodities. Price of A: $\textsf{₹}10$ (Base), $\textsf{₹}20$ (Current). Price of B: $\textsf{₹}100$ (Base), $\textsf{₹}150$ (Current). Which of the following statements is NOT correct regarding simple index methods for these two commodities?

(A) The Simple Aggregate Price Index is $\frac{$20+150$}{10+100} \times 100 = \frac{170}{110} \times 100 \approx 154.55$.

(B) The price relative for A is 200.

(C) The price relative for B is 150.

(D) The Simple Average of Price Relatives (AM) is $\frac{200+150}{2} = 175$.

Question 7. Simple index methods are generally NOT recommended for constructing official price indices like CPI or WPI because:

(A) They are too complex to calculate.

(B) They do not account for the different consumption patterns or importance of commodities.

(C) They fail to satisfy desirable theoretical tests of adequacy (generally).

(D) They require detailed quantity data which is often hard to obtain.

Question 8. For constructing a Simple Quantity Index using the Simple Aggregate Method, which of the following is NOT required?

(A) Quantities in the current period.

(B) Quantities in the base period.

(C) Prices in the current period.

(D) Summation of quantities.

Question 9. Which of the following is NOT a limitation shared by both Simple Aggregate and Simple Average of Price Relatives methods?

(A) They don't use explicit weights for commodities.

(B) They can be distorted by disproportionate changes in some items.

(C) They are highly sensitive to the units of measurement for prices.

(D) They do not reflect changes in overall expenditure patterns.

Question 10. If prices of two commodities are $\textsf{₹}10, \textsf{₹}10$ in the base year and $\textsf{₹}12, \textsf{₹}15$ in the current year. Which of the following is NOT true about the Simple Aggregate Price Index and Simple Average of Price Relatives (AM)?

(A) Simple Aggregate Index = $\frac{$12+15$}{10+10} \times 100 = \frac{27}{20} \times 100 = 135$.

(B) Price relative for 1st commodity = 120.

(C) Price relative for 2nd commodity = 150.

(D) Simple Average of Price Relatives (AM) = $\frac{135}{2} = 67.5$.

Question 1. Which of the following is NOT a weighted aggregate method of constructing index numbers?

(A) Laspeyres Method.

(B) Paasche Method.

(C) Simple Average of Price Relatives Method.

(D) Marshall-Edgeworth Method.

Question 2. Laspeyres Price Index ($P_{01}^L$) uses base period quantities ($q_0$) as weights. Which of the following is NOT the correct formula for Laspeyres Price Index?

(A) $\frac{\sum p_1 q_0}{\sum p_0 q_0} \times 100$

(B) $\frac{\sum p_1 W}{\sum p_0 W} \times 100$ where $W = q_0$

(C) $\sum \left(\frac{p_1}{p_0} \times 100\right) W / \sum W$ where $W = p_0 q_0$

(D) $\frac{\sum p_1 q_1}{\sum p_0 q_1} \times 100$

Question 3. Paasche Price Index ($P_{01}^P$) uses current period quantities ($q_1$) as weights. Which of the following is NOT a consequence or characteristic of using current period quantities?

(A) It reflects the current consumption/production pattern.

(B) It tends to overstate the price increase.

(C) It requires collecting quantity data for the current period every time the index is calculated.

(D) Its formula is $\frac{\sum p_1 q_1}{\sum p_0 q_1} \times 100$.

Question 4. Fisher's Ideal Index is the geometric mean of Laspeyres and Paasche indices. Which of the following is NOT true about Fisher's Ideal Index?

(A) It is considered theoretically superior to Laspeyres and Paasche.

(B) It satisfies the Time Reversal Test.

(C) It satisfies the Factor Reversal Test.

(D) It is the arithmetic mean of Laspeyres and Paasche indices.

Question 5. Marshall-Edgeworth Index uses the average of base and current period quantities as weights. Which of the following is NOT a correct formula for Marshall-Edgeworth Price Index?

(A) $\frac{\sum p_1 (q_0+q_1)}{\sum p_0 (q_0+q_1)} \times 100$

(B) $\frac{\sum p_1 q_0 + \sum p_1 q_1}{\sum p_0 q_0 + \sum p_0 q_1} \times 100$

(C) $\frac{\sum p_1 \frac{(q_0+q_1)}{2}}{\sum p_0 \frac{(q_0+q_1)}{2}} \times 100$

(D) $\frac{\sum p_1 \sqrt{q_0 q_1}}{\sum p_0 \sqrt{q_0 q_1}} \times 100$

Question 6. In the Weighted Average of Price Relatives method, which of the following is NOT a typical choice for weights ($W$)?

(A) Base period prices ($p_0$).

(B) Base period quantities ($q_0$).

(C) Base period values ($p_0 q_0$).

(D) Current period values ($p_1 q_1$).

Question 7. Which of the following is NOT a disadvantage of using Laspeyres Index?

(A) It tends to overstate price changes due to substitution bias.

(B) It uses outdated base period consumption patterns over time.

(C) It requires collecting current period quantity data for each period.

(D) It fails the Factor Reversal Test.

Question 8. Which of the following is NOT an advantage of using Paasche Index?

(A) It reflects current consumption patterns.

(B) It tends to understate price changes due to substitution bias.

(C) It is easier to calculate for multiple periods as base quantities are constant.

(D) It requires collecting current period quantity data, which can be costly or difficult.

Question 9. Which of the following statements about weighted quantity indices is NOT correct?

(A) Laspeyres Quantity Index uses base period prices as weights.

(B) Paasche Quantity Index uses current period prices as weights.

(C) Fisher's Ideal Quantity Index is the geometric mean of Laspeyres and Paasche Quantity Indices.

(D) Weighted quantity indices measure changes in price levels.

Question 10. Which of the following is NOT a reason why weighted index numbers are preferred over simple index numbers in official statistics?

(A) They account for the differing importance of commodities.

(B) They are always easier and less resource-intensive to compute.

(C) They provide a more representative measure of the overall change.

(D) They can be designed to satisfy certain theoretical properties.

Question 1. Which of the following is NOT a recognized test of adequacy for index number formulas?

(A) Time Reversal Test.

(B) Factor Reversal Test.

(C) Circular Test.

(D) Arithmetic Mean Test.

Question 2. The Time Reversal Test requires $P_{01} \times P_{10} = 1$ (for ratios) or $P_{01} \times P_{10} = 10000$ (for percentage indices). Which of the following is NOT true regarding this test?

(A) It checks for symmetry with respect to time reversal.

(B) It ensures that the comparison from 0 to 1 is consistent with the comparison from 1 to 0.

(C) Laspeyres Index satisfies this test.

(D) Fisher's Ideal Index satisfies this test.

Question 3. The Factor Reversal Test requires that $P_{01} \times Q_{01} = V_{01}$. Which of the following statements about this test is NOT correct?

(A) It checks for symmetry with respect to interchanging prices and quantities.

(B) It ensures that the product of the price and quantity index equals the corresponding value index.

(C) Paasche Index satisfies this test.

(D) Fisher's Ideal Index satisfies this test.

Question 4. The Circular Test requires $P_{01} \times P_{12} = P_{02}$. Which of the following is NOT a reason why this test is important?

(A) It ensures consistency when chaining index numbers across multiple periods.

(B) It ensures that direct and indirect (chained) comparisons between two periods are the same, regardless of the intermediate period.

(C) It is satisfied by most commonly used weighted index numbers like Laspeyres and Paasche.

(D) Failure of this test can lead to inconsistencies when shifting the base period.

Question 5. Which of the following statements about Fisher's Ideal Index and the tests of adequacy is NOT true?

(A) Fisher's Ideal Index is the geometric mean of Laspeyres and Paasche.

(B) Fisher's Ideal Index satisfies the Time Reversal Test.

(C) Fisher's Ideal Index satisfies the Factor Reversal Test.

(D) Fisher's Ideal Index satisfies the Circular Test.

Question 6. Which of the following statements about the Marshall-Edgeworth Index and tests is NOT correct?

(A) It uses the average of base and current quantities as weights.

(B) It satisfies the Time Reversal Test.

(C) It satisfies the Factor Reversal Test.

(D) It satisfies the Circular Test.

Question 7. Which of the following index number formulas does NOT satisfy the Time Reversal Test?

(A) Simple Geometric Mean of Price Relatives (for more than 2 items)

(B) Fisher's Ideal Index

(C) Laspeyres Price Index

(D) Marshall-Edgeworth Index

Question 8. Which of the following index number formulas does NOT satisfy the Factor Reversal Test?

(A) Laspeyres Price Index

(B) Paasche Price Index

(C) Fisher's Ideal Index

(D) Marshall-Edgeworth Index

Question 9. The Value Index ($V_{01}$) formula is $\frac{\sum p_1 q_1}{\sum p_0 q_0} \times 100$. If a price index formula satisfies the Factor Reversal Test, which of the following is NOT necessarily true?

(A) The corresponding quantity index formula is related to the price index formula.

(B) $P_{01} \times Q_{01} = V_{01}$ holds for that specific pair of price and quantity index formulas.

(C) The formula satisfies the Time Reversal Test.

(D) The formula is theoretically consistent in its treatment of prices and quantities.

Question 10. Which of the following is NOT a reason why an index number formula might be used in practice even if it fails some theoretical tests of adequacy?

(A) Data availability might be better for the formula.

(B) It might be simpler to compute.

(C) It perfectly reflects all changes in the economy.

(D) It might be more relevant for the specific purpose of the index.

Question 1. Which of the following is NOT a defining characteristic of time series data?

(A) Observations are collected over successive periods of time.

(B) The order of observations is important.

(C) Data points are independent of each other.

(D) It deals with the behavior of a variable over time.

Question 2. Which of the following is NOT an example of time series data?

(A) Annual production of cars in India from 2010 to 2023.

(B) Quarterly unemployment rate in West Bengal over 5 years.

(C) Heights of students in a class recorded at the same time.

(D) Daily temperature readings in Chennai for a year.

Question 3. Which of the following is NOT a defining characteristic of time series data?

(A) Observations are collected over successive periods of time.

(B) The order of observations is important.

(C) Data points are independent of each other.

(D) It deals with the behavior of a variable over time.

Question 4. Which of the following is NOT an example of time series data?

(A) Annual production of cars in India from 2010 to 2023.

(B) Quarterly unemployment rate in West Bengal over 5 years.

(C) Heights of students in a class recorded at the same time.

(D) Daily temperature readings in Chennai for a year.

Question 5. Which of the following is NOT a primary objective of time series analysis?

(A) Understanding the underlying patterns in the data.

(B) Forecasting future values of the series.

(C) Determining cause-and-effect relationships between unrelated variables.

(D) Aiding in planning and decision-making processes.

Question 6. Which of the following statements about univariate time series analysis is NOT correct?

(A) It involves the analysis of a single variable over time.

(B) It focuses on identifying patterns like trend and seasonality within that single variable.

(C) It studies the relationship between two or more time-dependent variables.

(D) Forecasting can be done using univariate models.

Question 7. The significance of time series analysis in various fields does NOT include:

(A) Providing insights into past performance.

(B) Enabling accurate predictions of future events.

(C) Assisting in policy formulation.

(D) Creating completely random data sets.

Question 8. Which of the following is NOT a common frequency for collecting time series data?

(A) Quarterly.

(B) Annually.

(C) Alphabetically.

(D) Monthly.

Question 9. The study of time series data assumes that the observations are NOT:

(A) Dependent on time.

(B) Independent and identically distributed.

(C) Subject to underlying patterns.

(D) Ordered sequentially.

Question 10. Which of the following is NOT a reason why time series analysis is important in economics?

(A) Analyzing inflation trends.

(B) Forecasting unemployment rates.

(C) Tracking industrial growth.

(D) Determining the popularity of a new product launch among different age groups at one point in time.

Question 11. Which of the following is NOT a typical step in basic time series analysis?

(A) Plotting the data.

(B) Identifying the underlying components.

(C) Decomposing the series.

(D) Randomly rearranging the data points.

Question 12. Which of the following is NOT a type of pattern commonly sought in time series analysis?

(A) Trend.

(B) Seasonality.

(C) Causality.

(D) Cyclical variations.

Question 1. Which of the following is NOT considered a component of a time series?

(A) Secular Trend.

(B) Seasonal Variation.

(C) Correlational Component.

(D) Irregular Variation.

Question 2. The Secular Trend in a time series is NOT characterized by:

(A) A long-term movement.

(B) A gradual and smooth change.

(C) Fluctuations repeating within a year.

(D) An underlying upward or downward direction.

Question 3. Which of the following is NOT a common cause of Seasonal Variation?

(A) Weather changes.

(B) Major economic recessions.

(C) Festivals and holidays.

(D) School calendar and administrative rules.

Question 4. Cyclical Variations are NOT typically characterized by:

(A) Association with business cycles.

(B) A fixed and strictly regular period.

(C) A period longer than a year.

(D) Wavelike fluctuations.

Question 5. The Irregular Component of a time series is NOT caused by:

(A) Unpredictable random events.

(B) Strikes or natural disasters.

(C) Underlying systematic patterns.

(D) Factors that are difficult to explain systematically.

Question 6. Which of the following is NOT a type of model used for time series decomposition?

(A) Additive Model.

(B) Multiplicative Model.

(C) Exponential Model.

(D) None of the above (meaning all listed are types of models).

Question 7. In the context of time series decomposition, the Additive Model is NOT suitable when:

(A) The magnitude of seasonal fluctuations is constant.

(B) The components are assumed to be independent in their effect on the original series value.

(C) The seasonal fluctuations increase or decrease proportionally with the trend.

(D) The model is represented as $Y = T + S + C + I$.

Question 8. The Multiplicative Model is NOT used when:

(A) The magnitude of seasonal fluctuations is constant.

(B) The series represents values that can be zero or negative.

(C) The components are believed to interact proportionally.

(D) The model is represented as $Y = T \times S \times C \times I$.

Question 9. Which component of a time series is generally considered the most difficult to predict accurately?

(A) Secular Trend.

(B) Seasonal Variation.

(C) Cyclical Variation.

(D) Irregular Variation.

Question 10. Seasonal adjustment of a time series involves removing the effect of which component?

(A) Secular Trend.

(B) Seasonal Variation.

(C) Cyclical Variation.

(D) Irregular Variation.

Question 1. Which of the following is NOT a method for measuring Secular Trend?

(A) Freehand Curve Method.

(B) Method of Semi-Averages.

(C) Seasonal Decomposition Method.

(D) Method of Least Squares.

Question 2. The Freehand Curve Method is NOT preferred for professional analysis because:

(A) It is highly subjective.

(B) Different analysts may draw different trend lines for the same data.

(C) It does not provide a mathematical equation for the trend.

(D) It is computationally very complex.

Question 3. Which of the following is NOT a step involved in the Method of Semi-Averages?

(A) Dividing the time series into two equal halves.

(B) Calculating the median for each half.

(C) Plotting the averages at the mid-points of the respective periods.

(D) Drawing a straight line through the plotted points.

Question 4. Which of the following is NOT a limitation of the Moving Average Method for measuring trend?

(A) It results in loss of data at the beginning and end of the series.

(B) The choice of the period can be arbitrary if the length of cycles is unknown.

(C) It is highly influenced by subjective judgment.

(D) It does not provide a functional relationship for the trend.

Question 5. The Method of Least Squares is NOT used to minimize:

(A) The sum of squared differences between observed and fitted values.

(B) The sum of absolute differences between observed and fitted values.

(C) The variance of the residuals (errors).

(D) The distance between the data points and the fitted line/curve in a specific way.

Question 6. When fitting a linear trend $Y = a + bT$ using Least Squares with the origin NOT at the middle year, which of the following is NOT true?

(A) The normal equations are $\sum Y = na + b \sum T$ and $\sum YT = a \sum T + b \sum T^2$.

(B) The calculation of 'a' and 'b' is more complex than when $\sum T = 0$.

(C) The interpretation of 'a' as the value at the origin remains the same.

(D) The value of 'b' necessarily changes.

Question 7. Which type of trend is NOT suitable to be fitted by a linear equation using the Method of Least Squares?

(A) Strictly increasing trend.

(B) Strictly decreasing trend.

(C) Trend showing a clear curvature (e.g., increasing at an increasing rate).

(D) Trend with constant growth rate.

Question 8. In the Method of Least Squares for a parabolic trend $Y_t = a + bT + cT^2$, which statement is NOT correct?

(A) The coefficient 'c' indicates the rate of change of the slope.

(B) If $c > 0$, the parabola opens downwards.

(C) If $c < 0$, the parabola opens downwards.

(D) This method requires solving a system of normal equations.

Question 9. Which method of trend measurement is LEAST suitable for forecasting future values?

(A) Freehand Curve Method.

(B) Method of Semi-Averages.

(C) Moving Average Method.

(D) Method of Least Squares.

Question 10. When using the Moving Average Method, which of the following is NOT smoothed out if the period of the moving average is shorter than the period of the fluctuation?

(A) Irregular Variations.

(B) Seasonal Variations (if period is less than a year).

(C) Cyclical Variations (if period is less than the cycle length).

(D) Long-term Secular Trend.

Question 1. Which of the following is NOT a major specific index number commonly used in India?

(A) Consumer Price Index (CPI).

(B) Wholesale Price Index (WPI).

(C) Index of Industrial Production (IIP).

(D) Standard of Living Index (SLI).

Question 2. Which of the following is NOT a purpose for which the Consumer Price Index (CPI) is used in India?

(A) Measuring retail inflation.

(B) Calculating Dearness Allowance (DA).

(C) Tracking changes in wholesale prices of goods.

(D) Adjusting nominal wages to real wages.

Question 3. The Wholesale Price Index (WPI) in India is NOT primarily used for:

(A) Tracking inflation at the wholesale level.

(B) Monitoring input costs for industries.

(C) Measuring the cost of living for urban households.

(D) Deflating national income estimates at the wholesale stage.

Question 4. The Index of Industrial Production (IIP) does NOT measure:

(A) Changes in the volume of production in the industrial sector.

(B) Price changes of industrial products.

(C) Growth in sectors like manufacturing, mining, and electricity.

(D) Short-term fluctuations in industrial output.

Question 5. Which of the following is NOT a common limitation of index numbers?

(A) Difficulty in selecting a representative basket of goods.

(B) Challenges in accounting for quality changes over time.

(C) They perfectly reflect the experience of every individual consumer.

(D) The need for periodic revision of the base period and weights.

Question 6. The CPI is often criticized for potentially overstating the true increase in the cost of living. Which of the following is NOT a reason for this potential overstatement?

(A) Substitution bias (fixed weights don't capture shifts to cheaper goods).

(B) Quality change bias (difficulty in adjusting for quality improvements).

(C) Inclusion of services in the basket.

(D) Introduction of new products (which may be cheaper or of better value).

Question 7. Deflating nominal values using a price index does NOT aim to:

(A) Remove the effect of inflation.

(B) Express values in constant prices.

(C) Determine the total nominal value in the current period.

(D) Measure changes in real purchasing power.

Question 8. Which of the following statements about the base year of specific indices in India is NOT correct?

(A) The base year for the current CPI (Combined) series is 2016.

(B) The base year for the current WPI series is 2011-12.

(C) The base year for IIP is periodically revised.

(D) The base year always remains the first year of data collection.

Question 9. The problem of comparability between different index series (different base years or methods) is NOT solved by:

(A) Shifting the base of one series to match the other.

(B) Linking the two series.

(C) Ignoring the differences and comparing them directly.

(D) Using conversion factors based on an overlapping period.

Question 10. Which of the following statements about WPI and CPI coverage in India is NOT true?

(A) WPI covers a wide range of goods at the wholesale level.

(B) CPI covers a basket of goods and services at the retail level.

(C) WPI includes services in its traditional calculation.

(D) CPI is considered more representative of the common consumer's expenditure.

Question 11. The weights used in the construction of CPI in India are primarily based on:

(A) Industrial production data.

(B) Wholesale trade volumes.

(C) Household consumption expenditure surveys.

(D) Government budget allocations.