Question

An index number is called a simple index when it is computed from:
A.Multiple variable
B.Bi-variable
C.Single variable
D.None of these

Answer 1

Hint: The change in variable is calculated or measured over time by an index number. They are not actually measurable as they represent relative changes to a variable or a group of variables with respect to a base.

Complete step-by-step answer:
An index number, when calculated from a single variable, is called a simple index number. Its properties are-
The simple index number gives equal value to all things regardless of what share it has.
 In other words, with respect to the variable given, it considers each object to be equal.
A simple index number is a number which, with respect to a base, measures a relative change in a single variable.
An index number, when calculated from multiple variables, is called Composite index. Its properties are-
 An index number is generated by combining two or more index numbers, and In order to determine the weighted average index number, a weighting is typically given to each index.
 A composite index number is such a number that calculates the average relative change with respect to a base in a group of relative variables.
The correct answer is option C.

Note: Index number is used in-
1.The government policies are framed using the index number of prices as economic policies are also based on index numbers.
2.It is used in measuring the changes in the standard of living of different countries over a period of time.
3.It helps in converting the nominal wages to real wages.