Q.6. What are the characteristics of index numbers?
Ans. The characteristics of index numbers are:
- These are expressed in percentage.
- These are relative measures.
- Index numbers are specialized averages.
- Index numbers measure charges which are not directly measurable.
Q.7. what are the advantages of index numbers?
Ans. The advantages of index numbers are:
- To get information about the changes in the internal price level.
- Increase or decrease in foreign trade.
- Knowledge about the changes in the cost of living in the country.
- Information about production trends in the country.
Q.8. What are the objectives of the consumer price Index?
Ans. The Objectives of the consumer price index are:
- To measure the impact of price change in purchasing power.
- To track inflation.
- To control inflation with the help of monetary policy to take decisions.
Q.9. What are the advantages of chain base index numbers?
Ans. Chain base index number has the following advantages:
- To introduce new items and omit old items.
- Free from seasonal variations.
- Presents a general picture of movements over a period of time.
Q.10. What are the disadvantages of chain base index numbers?
Ans. The disadvantages of chain base index number are:
- Long-range comparisons of chained percentages are computed from link relatives.
- It does not present any specific picture of the movements over a period of time.