Lesson 4.2.1.3

4.2.1.3 Uses of index numbers Quiz: AQA Economics, Unit 2

20 questions

Written by Revision Ninja · Last reviewed 11 October 2026

In partnership with Revision Ninja

Lesson 4.2.1.3, Uses of index numbers: 20 multiple choice questions for the AQA Economics (7136), Unit 2: The national and international economy, written with Revision Ninja.

Host it live on the board and students join with a game code on their own devices, or revise alone with Free Play. The answers are revealed in the game.

Host this setFree Play

The 20 questions

  1. What is the purpose of a price index?

    • To record the number of workers who change jobs in the economy during each year of the period.
    • To rank countries by the number of goods they export in a given year at prevailing exchange rates.
    • To measure the average change in prices over time relative to a base year.
    • To measure the total value of output produced in each year at current market prices in the economy.

  2. In an index series with base year 2015 = 100, what does an index value of 112 in 2020 mean?

    • Prices in 2020 are exactly the same as in 2015, because the index is always set to 100 in every year of the series.
    • Prices have risen by 1.12 pounds per unit in 2020, measured in pounds sterling against the base year value of 2015.
    • The price level, or the variable measured, is 12 per cent higher than in the base year 2015.
    • The price level is 112 per cent lower than in 2015, because the index is measured as a fall from the base value each year.

  3. A basket of goods costs £200 in the base year and £230 in the current year. What is the index value for the current year, with the base year equal to 100?

    • 115, since 230 divided by 200 multiplied by 100 equals 115.
    • 87, since 200 divided by 230 multiplied by 100 gives the index value of the current year in the series.
    • 130, since 230 minus 200 gives 30, which is 30 per cent of the base year value of the basket in the period.
    • 100, since the index is always set to 100 in the current year as well as in the base year of the series.

  4. An index is 2019 = 100, 2020 = 105 and 2021 = 110. What is the 2021 value when rebased to 2020 = 100?

    • 104.8, since 110 divided by 105 multiplied by 100 gives approximately 104.8.
    • 110.0, since rebasing does not change the index values in any year of the series at all.
    • 95.5, since 105 divided by 110 multiplied by 100 gives the rebased value for the year 2021 in the series.
    • 115.5, since 110 multiplied by 105 divided by 100 gives the rebased value for the year 2021 in the series.

  5. Why do price indices use weights?

    • Weights ensure that every good in the basket counts equally, which is why the index is always an unweighted average of prices.
    • Weights remove the need for a base year, since the index is then calculated without reference to any past period at all.
    • Weights are used to convert prices into the currency of another country for international comparisons in each year in the case described.
    • Goods and services differ in their share of household spending, so weights reflect how much each item contributes to the basket.

  6. A price index rises from 100 to 104, while wages rise by 3 per cent. What happens to real wages?

    • Real wages rise by 7 per cent, since the 4 point rise in the index added to the 3 per cent wage rise gives the total change.
    • Real wages rise by 3 per cent, since real wages always change by the same percentage as nominal wages in any period.
    • Real wages are unchanged, since the index and the wages both moved by a similar amount in percentage terms over the year.
    • Real wages fall by about 1 per cent, since 1.03 divided by 1.04 is approximately 0.99.

  7. What is a key limitation of a fixed-basket price index?

    • A fixed basket may not reflect changes in what households buy, so the index can overstate or understate true price changes.
    • A fixed basket cannot be compared over time, because the base year changes automatically to match current prices each period.
    • A fixed basket always reflects every change in household buying, so the index never misstates price changes in any year.
    • A fixed basket measures only the value of imports, which makes it unsuitable for measuring domestic prices in the economy.

  8. Why might a fixed-weight price index overstate inflation?

    • Consumers always buy more expensive goods when prices rise, so the basket becomes more expensive than it actually is in the year.
    • The base year is always set at zero, so every index value is inflated by the same fixed amount in each year of the series.
    • Index numbers ignore all price changes, so inflation is always overstated by the index in every period of time measured.
    • Consumers switch to cheaper goods when relative prices change, but a fixed basket does not capture this substitution.

  9. A CPI index is 125 in 2022 and 131.25 in 2023. What is the inflation rate for 2023?

    • 6.25 per cent, since the difference of 6.25 index points is itself the percentage inflation rate in the year concerned.
    • 5 per cent, since (131.25 minus 125) divided by 125 multiplied by 100 equals 5.
    • 4.8 per cent, since 125 divided by 131.25 multiplied by 100 gives the percentage rise between the two years in the series.
    • 131 per cent, since 131.25 divided by 100 gives the percentage inflation rate measured against the base year of the index.

  10. What is the base year used for in an index number series?

    • It is the year in which the basket was last updated, so the index is always calculated from that point only in the future.
    • It is the year in which the most goods were produced, so the index always uses that year's quantities as its weights.
    • It is the reference point against which all other index values are measured, and it is set equal to 100.
    • It is the first year in which inflation was recorded officially, so the index starts at that point in time for all series.

  11. Which of the following is a use of index numbers in the specification?

    • Measuring changes in the price level and in other economic variables, such as wages or output, over time.
    • Measuring the exact number of goods produced in each factory across the economy during a given year.
    • Recording the value of imports and exports in a single currency without any adjustment for price changes over time.
    • Measuring the total stock of wealth held by each household in the economy at a single point in time.

  12. Wages index is 150 and the CPI is 120 in 2020, both with 2010 = 100. What is the real wage index?

    • 125, since the wage index divided by the price index and multiplied by 100 gives the real wage index.
    • 270, since the wage index and the price index are added together to give the real wage level for the year.
    • 30, since the difference between the two index values gives the real wage change in index points for the year.
    • 80, since the price index divided by the wage index and multiplied by 100 gives the real wage level for the year.

  13. What is a weakness of using a very old base year for comparisons?

    • Changes in products and spending patterns since the base year mean the basket may no longer represent current consumption.
    • The base year fixes all future prices at their current level, so the index can never change after the base year is set.
    • The base year removes the need to update weights, because the base year basket always remains representative indefinitely.
    • The base year is always the year with the highest inflation, so index values are always overstated relative to the present.

  14. A salary of £24,000 is paid in the base year when the price index is 100. The index rises to 115. What salary keeps the purchasing power constant?

    • £24,000, since nominal salaries never need to change when the index rises in any year of the period under study.
    • £28,800, since £24,000 multiplied by 1.20 gives the salary needed to keep the real value constant in the year concerned.
    • £20,870, since £24,000 divided by 115 and multiplied by 100 gives the salary needed to keep the real value constant.
    • £27,600, since £24,000 multiplied by 115 divided by 100 keeps the purchasing power of the salary constant.

  15. Why might index numbers be contested as measures of inflation?

    • Index numbers always give the same result regardless of the basket used, so the choice of methods is irrelevant in practice.
    • Index numbers are fully objective, because they use the same basket and weights in every country and in every year in the case described.
    • Index numbers are never used by governments, so there is no debate about how they should be calculated in practice.
    • Choices of basket, weights and methods involve judgements, so different indices can give different measures of the same inflation.

  16. Which is a use of a price index when measuring national income over time?

    • Adding the price index to wage figures to get the employment rate for the economy in each year of the period.
    • Deflating nominal GDP by a price index to obtain real GDP, which allows output to be compared across years.
    • Multiplying nominal GDP by a price index to obtain real GDP, which increases the value of output in each year of the series.
    • Subtracting the base year value from the current value to obtain the level of unemployment in each year of the period.

  17. A basket costs £50 in the base year, £55 in 2019 and £60 in 2020. What is the index for 2020 with the base year equal to 100?

    • 125, since the price in 2020 is 25 per cent above the base year price of £50 in the index series.
    • 110, since the price rise of £10 from the base year is equal to 10 per cent of the base year value of the basket.
    • 120, since 60 divided by 50 multiplied by 100 gives 120.
    • 115, since the average of the 2019 and 2020 index values is taken as the index for 2020 in the series.

  18. Prices rise from 100 to 108 over a year, and a household's income rises by 5 per cent. What is the approximate change in real income?

    • Real income rises by 3 per cent, since 5 minus 2 gives the change in real income for the year in the economy.
    • Real income falls by 8 per cent, since the price index change is the only factor that determines real income in the year.
    • Real income is unchanged, since the income rise and the price rise are both measured in index points of 100 each.
    • Real income falls by about 2.8 per cent, since 1.05 divided by 1.08 is approximately 0.972.

  19. A household spends 40 per cent of its budget on food, and food prices rise by 10 per cent while other prices are unchanged. Roughly what is the effect on the index from food alone?

    • No change in the index, since weights offset price changes for goods that take up a large share of household spending.
    • A rise of 40 per cent in the index, since the food share of the budget is equal to the rise in the index for the period concerned.
    • A rise of 10 per cent in the index, since the index always moves by the same percentage as the price of any single good in the basket.
    • A rise of about 4 per cent in the index, since the food weight of 0.4 multiplied by the 10 per cent price rise gives the contribution.

  20. Why would a statistician rebase an index series?

    • To change the weights of the basket, so that more goods count equally in the index in every year of the series in the case described.
    • To move the base year to a more recent period, so that comparisons are more meaningful for current users of the data.
    • To remove the price effect from the series entirely, so that only quantities are measured in the index over time.
    • To make all index values fall to zero, so that the series can be compared with unemployment figures in each period.

All AQA Economics quizzes