MCQ Economics (English Medium) Part B Statistics for Economics Unit-3 Statistical Tools and interpretation, HS 1st Year

 Unit-3 Statistical Tools and interpretation: Marks-26 

Measures of central tendency –Arithmetic Mean, Median and Mode Correlation: Meaning and Properties, scatter Diagram, Measures of Correlation –Karl Pearson’s Method (Two variables ungrouped data), Spearman’s Rank correlation Index Numbers: Meaning, Construction of an Index Number, Some important index numbers: wholesale price index, consumer price index and index of Industrial production, Uses of index numbers

Measures of Central Tendency

1. What is the primary purpose of measures of central tendency?
   a) To sort data in ascending order
   b) To summarize a data set with a single value
   c) To eliminate outliers from the data
   d) To compare two data sets
   Answer: b

2. Which of the following is not a commonly used measure of central tendency?
   a) Arithmetic Mean
   b) Median
   c) Mode
   d) Variance
   Answer: d

3. What is the measure of central tendency that is affected most by extreme values?
   a) Arithmetic Mean
   b) Median
   c) Mode
   d) Harmonic Mean
   Answer: a

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Set 2: Arithmetic Mean

4. The arithmetic mean is calculated by dividing the sum of all observations by the _____.
   a) Number of observations
   b) Median of observations
   c) Mode of observations
   d) Range of observations
   Answer: a

5. In the direct method of calculating arithmetic mean for ungrouped data, the formula used is:
   a) $\frac{\text{Sum of deviations}}{\text{Number of observations}}$
   b) $\frac{\text{Sum of observations}}{\text{Number of observations}}$
   c) $\text{Sum of mid-points} \times \text{Frequency}$
   d) None of the above
   Answer: b

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Set 3: Median

6. The median divides the data into two equal parts such that:
   a) All values are greater than the median
   b) Half the values are greater, and half are smaller than the median
   c) Most values are close to the median
   d) The median equals the mode
   Answer: b

7. To calculate the median for a discrete series, which step is essential?
   a) Find the sum of frequencies
   b) Locate the cumulative frequency corresponding to the median position
   c) Calculate the deviations from the mean
   d) Identify the most frequent value
   Answer: b

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Set 4: Mode

8. Mode is defined as:
   a) The arithmetic average of the data
   b) The middle value of the data
   c) The value that occurs most frequently
   d) The difference between maximum and minimum values
   Answer: c

9. Which of the following data sets is bimodal?
   a) 1, 2, 3, 4, 5, 6
   b) 1, 2, 2, 3, 3, 4
   c) 1, 1, 1, 1, 1
   d) 1, 2, 3, 4, 4
   Answer: b

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Set 5: Practical Applications

10. Which measure of central tendency is best for qualitative data?
    a) Arithmetic Mean
    b) Median
    c) Mode
    d) Weighted Mean
    Answer: c

11. For skewed data distributions, the most appropriate measure of central tendency is:
    a) Mean
    b) Median
    c) Mode
    d) Range
    Answer: b

Set 6: Calculations and Formulae

12. The formula for calculating the arithmetic mean for grouped data using the direct method is:
    a) $\text{Mean} = \frac{\Sigma f \cdot x}{N}$
    b) $\text{Mean} = \frac{\Sigma x}{N}$
    c) $\text{Mean} = \frac{\Sigma d}{N}$
    d) $\text{Mean} = \frac{\Sigma f}{x}$
    Answer: a

13. If the mean of a data set is 50 and the sum of all observations is 500, how many observations are in the data set?
    a) 5
    b) 10
    c) 15
    d) 20
    Answer: b

14. In the assumed mean method, the formula to calculate arithmetic mean is:
    a) $\text{Mean} = A + \frac{\Sigma d}{N}$
    b) $\text{Mean} = \Sigma f \cdot x$
    c) $\text{Mean} = A - \frac{\Sigma d}{N}$
    d) $\text{Mean} = \frac{\Sigma f}{A}$
    Answer: a

15. The class containing the maximum frequency in a frequency distribution is called the:
    a) Median Class
    b) Mode Class
    c) Cumulative Class
    d) Arithmetic Mean Class
    Answer: b

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Set 7: Properties and Characteristics

16. Which of the following is true about the arithmetic mean?
    a) The sum of deviations from the mean is always zero
    b) It is not affected by extreme values
    c) It is a positional average
    d) It is the same as the mode for all data sets
    Answer: a

17. For which type of data is the harmonic mean most suitable?
    a) Data involving rates and ratios
    b) Qualitative data
    c) Data with extreme outliers
    d) Data with only one observation
    Answer: a

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Set 8: Median Calculations

18. If the total number of observations is even, the median is calculated as:
    a) The middle value
    b) The mean of the two middle values
    c) The sum of all values divided by the number of values
    d) The mode of the data set
    Answer: b

19. The position of the median in an ordered data set can be found using the formula:
    a) $\frac{N}{2}$
    b) $\frac{N+1}{2}$
    c) $N+1$
    d) $\frac{\Sigma x}{N}$
    Answer: b

20. In a cumulative frequency table, the value of the median is located using the:
    a) Class with the largest frequency
    b) Median class
    c) Lower limit of the first class
    d) Total number of observations
    Answer: b

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Set 9: Application of Mode

21. If the modal class has a frequency of 40, the preceding class has a frequency of 25, and the succeeding class has a frequency of 20, what is $D_1$?
    a) 15
    b) 20
    c) 25
    d) 40
    Answer: a

22. Mode is often preferred over mean and median when:
    a) The data contains extreme values
    b) Data has multiple peaks
    c) The data set is qualitative
    d) The range is very large
    Answer: c

23. For a continuous series, the formula to calculate mode is:
    a) $\text{Mode} = L + \left( \frac{D_1}{D_1 + D_2} \right) \cdot h$
    b) $\text{Mode} = \frac{\Sigma f \cdot x}{N}$
    c) $\text{Mode} = \text{Median} + 3 \cdot (\text{Mean} - \text{Median})$
    d) None of the above
    Answer: a

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Set 10: Quartiles and Percentiles

24. The first quartile (Q1) represents:
    a) The top 25% of observations
    b) The lowest 25% of observations
    c) The middle 50% of observations
    d) The mode of the data set
    Answer: b

25. If your test score is in the 90th percentile, it means:
    a) 90% of students scored higher than you
    b) 90% of students scored lower than you
    c) You scored 90% on the test
    d) Your score is the median
    Answer: b

Set 11: Advanced Arithmetic Mean

26. Which of the following methods simplifies the computation of arithmetic mean for large data sets?
    a) Step deviation method
    b) Direct method
    c) Cumulative frequency method
    d) Weighted average method
    Answer: a

27. In the step deviation method, the deviations are calculated as:
    a) $d = X - A$
    b) $d' = \frac{d}{c}$
    c) $d = \Sigma f \cdot X$
    d) $d = \frac{\Sigma f}{N}$
    Answer: b

28. If the sum of deviations ($\Sigma d$) is 100, the assumed mean is 50, and the number of observations is 20, what is the arithmetic mean?
    a) 50
    b) 55
    c) 60
    d) 45
    Answer: b

29. The weighted arithmetic mean is most useful when:
    a) All values have equal importance
    b) Values are qualitative
    c) Values have varying importance or weights
    d) The data set has no outliers
    Answer: c

30. The formula for the weighted arithmetic mean is:
    a) $\frac{\Sigma W \cdot X}{\Sigma W}$
    b) $\frac{\Sigma X}{\Sigma W}$
    c) $\Sigma W \cdot \Sigma X$
    d) $\frac{\Sigma W}{\Sigma X}$
    Answer: a

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Set 12: Properties of Median

31. Median is unaffected by:
    a) The addition of new data points
    b) Extreme values or outliers
    c) Changes in cumulative frequency
    d) All of the above
    Answer: b

32. To calculate the median for grouped data, which formula is used?
    a) $\text{Median} = L + \left( \frac{\frac{N}{2} - \text{cf}}{f} \right) \cdot h$
    b) $\text{Median} = \frac{\Sigma f \cdot X}{N}$
    c) $\text{Median} = \Sigma \left( X - A \right)$
    d) None of the above
    Answer: a

33. For a continuous series, if the median lies in the 40–50 class, the lower limit (L) of the class is:
    a) 40
    b) 45
    c) 50
    d) Depends on the frequencies
    Answer: a

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Set 13: Applications of Mode

34. Mode is most appropriate for data that is:
    a) Continuous and symmetric
    b) Discrete with multiple frequencies
    c) Skewed with extreme outliers
    d) Quantitative with no repetitions
    Answer: b

35. In a frequency distribution, if the highest frequency corresponds to the 20–30 class, this is called the:
    a) Median class
    b) Modal class
    c) Arithmetic class
    d) Central class
    Answer: b

36. In bimodal data, how many modes are present?
    a) 1
    b) 2
    c) Multiple
    d) None
    Answer: b

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Set 14: Quartiles and Percentiles

37. The difference between Q3 and Q1 is called:
    a) Range
    b) Interquartile range
    c) Median deviation
    d) Percentile range
    Answer: b

38. If Q1 is 20, Q2 is 50, and Q3 is 80, what is the interquartile range?
    a) 20
    b) 50
    c) 60
    d) 100
    Answer: c

39. Percentiles are used to:
    a) Divide data into two equal halves
    b) Compare cumulative frequencies
    c) Divide data into 100 equal parts
    d) Highlight the mode of the data
    Answer: c

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Set 15: Comparing Measures of Central Tendency

40. Which of the following relationships is generally true in a positively skewed distribution?
    a) Mean < Median < Mode
    b) Mode < Median < Mean
    c) Median < Mode < Mean
    d) Mean = Median = Mode
    Answer: b

41. In a perfectly symmetrical distribution, the measures of central tendency will be:
    a) Mean > Median > Mode
    b) Mean < Median < Mode
    c) Mean = Median = Mode
    d) None of the above
    Answer: c

42. Which measure of central tendency is the most sensitive to changes in data values?
    a) Mean
    b) Median
    c) Mode
    d) Quartiles
    Answer: a

Correlation

Introduction to Correlation

1. What does correlation measure?
   (A) Causation
   (B) Direction and intensity of the relationship
   (C) Random association
   (D) Probability
   Answer: (B)

2. What type of relationship does correlation indicate?
   (A) Linear and causative
   (B) Covariation, not causation
   (C) Non-linear only
   (D) Dependent variables
   Answer: (B)

3. What is an example of a coincidence rather than causation in correlation?
   (A) Temperature and ice-cream sales
   (B) Migratory birds and local birth rates
   (C) Price and demand of apples
   (D) Rainfall and agricultural productivity
   Answer: (B)

Types of Relationships

4. What does a positive correlation indicate?
   (A) Variables move in opposite directions
   (B) Variables move in the same direction
   (C) No movement
   (D) Non-linear association
   Answer: (B)

5. What type of correlation exists between study time and failure probability?
   (A) Positive
   (B) Negative
   (C) No correlation
   (D) Perfect correlation
   Answer: (B)

6. Which of the following depicts no correlation?
   (A) X and Y values increase together
   (B) X rises while Y falls
   (C) Scatter points show no consistent pattern
   (D) Scatter points lie on a straight line
   Answer: (C)

Techniques for Measuring Correlation

7. What is the graphical representation of a relationship between two variables?
   (A) Histogram
   (B) Scatter diagram
   (C) Line graph
   (D) Pie chart
   Answer: (B)

8. Which measure provides a numerical value of the degree of linear relationship?
   (A) Spearman’s coefficient
   (B) Scatter diagram
   (C) Karl Pearson’s coefficient
   (D) Covariance
   Answer: (C)

9. Spearman’s rank correlation is best suited for variables that are:
   (A) Precisely measured
   (B) Non-numerical attributes
   (C) Linearly associated
   (D) Perfectly correlated
   Answer: (B)

10. Which method should be used when there are extreme values in the data?
    (A) Karl Pearson’s coefficient
    (B) Scatter diagram
    (C) Spearman’s rank correlation
    (D) None of the above
    Answer: (C)

Karl Pearson’s Coefficient

11. Karl Pearson’s coefficient is also known as:
    (A) Rank correlation
    (B) Product moment correlation
    (C) Covariance
    (D) Scatter correlation
    Answer: (B)

12. What is the range of the correlation coefficient (r)?
    (A) -1 to +1
    (B) 0 to infinity
    (C) -infinity to +infinity
    (D) None of the above
    Answer: (A)

13. What does a correlation coefficient of 0 imply?
    (A) Strong relationship
    (B) No linear relationship
    (C) Non-linear association
    (D) Perfect correlation
    Answer: (B)

14. Which property of r allows simplification using the step-deviation method?
    (A) Independence of origin
    (B) Change of scale independence
    (C) Both A and B
    (D) None of the above
    Answer: (C)

Spearman’s Rank Correlation

15. Spearman’s rank correlation lies between:
    (A) 0 and 1
    (B) -1 and +1
    (C) -infinity and +infinity
    (D) None of the above
    Answer: (B)

16. What is the main advantage of Spearman’s rank correlation over Pearson’s coefficient?
    (A) Accuracy with linear data
    (B) Usability with ordinal data
    (C) Dependence on precise measurement
    (D) Compatibility with extreme values
    Answer: (D)

17. Which formula represents Spearman’s rank correlation?
    (A) $r = \frac{\sum x \cdot y}{n}$
    (B) $r = 1 - \frac{6 \sum D^2}{n(n^2-1)}$
    (C) $r = \frac{\text{Cov}(X, Y)}{\sigma_X \sigma_Y}$
    (D) None of the above
    Answer: (B)

Properties and Applications

18. What does a perfect correlation (r = ±1) imply?
    (A) Strong association
    (B) Exact linear relationship
    (C) Causal relationship
    (D) Random association
    Answer: (B)

19. The correlation coefficient (r) is:
    (A) Unitless
    (B) Dependent on scale
    (C) Measured in percentages
    (D) None of the above
    Answer: (A)

20. Can correlation alone prove causation?
    (A) Yes
    (B) No
    (C) Only for linear relationships
    (D) Depends on the context
    Answer: (B)

Interpretation of Correlation

21. If $r$ is close to zero, what does it indicate?
    (A) Strong non-linear relationship
    (B) Weak linear relationship
    (C) Strong linear relationship
    (D) No relationship at all
    Answer: (B)

22. A negative correlation implies that:
    (A) Both variables increase together
    (B) Both variables decrease together
    (C) One variable increases as the other decreases
    (D) No relationship exists
    Answer: (C)

23. When r = 0.9, the relationship between two variables is:
    (A) Weak and negative
    (B) Strong and positive
    (C) Non-linear
    (D) No correlation
    Answer: (B)

24. What does an $r = -0.9$ imply in the case of price and supply?
    (A) High price and low supply
    (B) Low price and high supply
    (C) Strong negative correlation
    (D) All of the above
    Answer: (D)

Scatter Diagrams

25. What does a perfect positive correlation look like on a scatter diagram?
    (A) All points lie on an upward-sloping line
    (B) All points lie on a downward-sloping line
    (C) Randomly scattered points
    (D) No discernible pattern
    Answer: (A)

26. Which scatter diagram represents no correlation?
    (A) Points scattered randomly
    (B) Points forming a straight line
    (C) Points in a parabolic shape
    (D) Points on an upward-sloping line
    Answer: (A)

27. A downward-sloping line in a scatter diagram indicates:
    (A) Positive correlation
    (B) Negative correlation
    (C) No correlation
    (D) Perfect correlation
    Answer: (B)

28. If scatter points are widely dispersed around a line, what does it indicate?
    (A) High correlation
    (B) Low correlation
    (C) Perfect correlation
    (D) No correlation
    Answer: (B)

Step Deviation Method

29. Why is the step deviation method useful?
    (A) It avoids complex calculations
    (B) It reduces the burden of calculation with large data
    (C) It is only applicable for small data sets
    (D) It requires fewer observations
    Answer: (B)

30. What does the step deviation method rely on?
    (A) Accurate values of covariance
    (B) Independence of origin and scale
    (C) Non-linear relationships
    (D) Precise numerical rankings
    Answer: (B)

Rank Correlation

31. Spearman’s rank correlation is particularly used when:
    (A) Data is linear and precise
    (B) Data is non-linear or ordinal
    (C) Scatter diagrams show no relation
    (D) Data is measured in the same units
    Answer: (B)

32. What is the correction factor in Spearman’s rank correlation for repeated ranks?
    (A) Sum of deviations squared
    (B) The mean of repeated ranks
    (C) Adjustment for tied ranks
    (D) None of the above
    Answer: (C)

33. Which of the following is NOT a property of Spearman’s rank correlation?
    (A) It lies between -1 and +1
    (B) It measures linear relationship in ordinal data
    (C) It uses actual values instead of ranks
    (D) It is unaffected by extreme values
    Answer: (C)

Properties of Correlation

34. Which property of correlation allows for measurement without units?
    (A) Magnitude independence
    (B) Covariance reliance
    (C) Independence from scale
    (D) None of the above
    Answer: (C)

35. Correlation is high when the value of r is close to:
    (A) -1 or 1
    (B) 0
    (C) -0.5 or 0.5
    (D) Infinity
    Answer: (A)

36. The correlation coefficient remains unaffected by:
    (A) Non-linear relationships
    (B) Change of origin and scale
    (C) High covariance
    (D) None of the above
    Answer: (B)

37. What does r = 1 signify?
    (A) Weak positive linear relationship
    (B) Perfect positive linear relationship
    (C) Strong non-linear relationship
    (D) Perfect negative linear relationship
    Answer: (B)

Correlation and Causation

38. Correlation does NOT imply:
    (A) Association
    (B) Causation
    (C) Covariation
    (D) Direction of relationship
    Answer: (B)

39. If an increase in the number of doctors is correlated with more deaths, the interpretation could be:
    (A) Doctors cause deaths
    (B) Correlation shows causation
    (C) The increase in deaths could be due to other factors
    (D) No correlation exists
    Answer: (C)

40. What is an example of spurious correlation?
    (A) Ice-cream sales and drowning rates
    (B) Height and weight of individuals
    (C) Price and demand of apples
    (D) Temperature and electricity bills
    Answer: (A)

41. Which of the following relationships is likely to show a positive correlation?
    (A) Price of apples and their demand
    (B) Temperature and ice-cream sales
    (C) Price of bonds and interest rates
    (D) Education level and unemployment
    Answer: (B)

42. If two variables have no linear relationship, the value of r will be:
    (A) 1
    (B) -1
    (C) 0
    (D) Undefined
    Answer: (C)

43. What does a strong positive rank correlation coefficient (close to +1) indicate?
    (A) One variable consistently decreases as the other increases
    (B) The ranks of two variables are inversely proportional
    (C) The ranks of two variables increase together
    (D) The ranks show no consistent pattern
    Answer: (C)

44. When calculating the correlation coefficient $r$, what must be true about the data?
    (A) Both variables must have equal variance
    (B) The relationship should be linear
    (C) Data must be ranked in order
    (D) One variable must cause the other
    Answer: (B)

45. Which diagram indicates a perfect negative correlation?
    (A) Points scattered randomly
    (B) Points lying on a straight line sloping downward
    (C) Points forming an upward parabola
    (D) Points close to a downward-sloping line but not on it
    Answer: (B)

46. Spearman’s rank correlation formula includes $D^2$, which represents:
    (A) Sum of deviations
    (B) Squared differences in ranks
    (C) Standard deviation
    (D) Covariance
    Answer: (B)

47. In the formula for Karl Pearson’s coefficient, $\sigma_X$ and $\sigma_Y$ denote:
    (A) Mean values of X and Y
    (B) Covariance of X and Y
    (C) Standard deviations of X and Y
    (D) Range of X and Y
    Answer: (C)

48. Which tool is the most appropriate for visually identifying the type of correlation?
    (A) Line graph
    (B) Bar chart
    (C) Scatter diagram
    (D) Histogram
    Answer: (C)

49. What is the range of values that the Spearman’s rank correlation coefficient can take?
    (A) 0 to infinity
    (B) -infinity to +infinity
    (C) -1 to +1
    (D) 0 to 1
    Answer: (C)

50. If two variables are perfectly correlated, what will the scatter diagram show?
    (A) Randomly scattered points
    (B) A straight line (positive or negative slope)
    (C) A U-shaped curve
    (D) No discernible pattern
    Answer: (B)

Application-Based MCQs

51. What does $r = 0.7$ imply in practical terms?
    (A) Weak negative correlation
    (B) Strong positive correlation
    (C) No correlation
    (D) Perfect correlation
    Answer: (B)

52. If the price of a product increases and its demand decreases, the correlation is:
    (A) Positive
    (B) Negative
    (C) Zero
    (D) Non-existent
    Answer: (B)

53. The correlation coefficient between two uncorrelated variables will likely be:
    (A) -1
    (B) 0
    (C) 1
    (D) Undefined
    Answer: (B)

54. What is the most likely value of $r$ for the relationship between age and experience?
    (A) -0.5
    (B) 0.2
    (C) 0.8
    (D) -1
    Answer: (C)

55. Which of the following best describes an example of high positive correlation?
    (A) High temperature and high coffee sales
    (B) High temperature and low heating expenses
    (C) High GDP and high national income
    (D) High rainfall and low crop yields
    Answer: (C)

56. If $r = 0.98$, what can be inferred?
    (A) The relationship is almost perfect and positive
    (B) The relationship is weak and positive
    (C) The relationship is perfect and negative
    (D) The variables are unrelated
    Answer: (A)

57. If a dataset has extreme outliers, which method is preferred for correlation?
    (A) Scatter diagram
    (B) Karl Pearson’s coefficient
    (C) Spearman’s rank correlation
    (D) Covariance
    Answer: (C)

58. What is the relationship between height and weight of individuals likely to show?
    (A) Negative correlation
    (B) Positive correlation
    (C) No correlation
    (D) Perfect correlation
    Answer: (B)

59. A correlation coefficient close to 0 indicates:
    (A) A perfect relationship
    (B) A weak or no relationship
    (C) A strong linear relationship
    (D) Causation
    Answer: (B)

60. What type of correlation exists if all scatter points lie on a horizontal line?
    (A) Perfect positive correlation
    (B) No correlation
    (C) Perfect negative correlation
    (D) Non-linear correlation
    Answer: (B)

Index Numbers

Basic Concepts of Index Numbers

1. What does an index number measure?

   • A) Absolute changes
   • B) Relative changes
   • C) Only quantity changes
   • D) Only price changes
     Answer: B

2. Index numbers are generally expressed in terms of:

   • A) Ratios
   • B) Percentages
   • C) Fractions
   • D) Decimals
     Answer: B

3. What is the value assigned to the base period in an index number?

   • A) 0
   • B) 1
   • C) 50
   • D) 100
     Answer: D

4. Which period is referred to as the base period in an index number?

   • A) Any random period
   • B) A normal period without major fluctuations
   • C) The current period
   • D) A period with extreme values
     Answer: B

5. What does an index number of 250 indicate?

   • A) A 250% increase from the base period
   • B) The value is two and a half times the base period
   • C) The base period is 50% of the current period
   • D) No change from the base period
     Answer: B

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Types of Index Numbers

6. Price index numbers measure changes in:

   • A) Retail prices
   • B) Wholesale prices
   • C) Prices of commodities
   • D) All of the above
     Answer: D

7. What is the difference between a price index and a quantity index?

   • A) Price index measures prices, quantity index measures volumes
   • B) Price index uses base-year quantities
   • C) Quantity index focuses on employment rates
   • D) Both measure only percentage changes
     Answer: A

8. What type of index measures the cost of living?

   • A) Consumer Price Index (CPI)
   • B) Wholesale Price Index (WPI)
   • C) Industrial Production Index
   • D) Quantity Index
     Answer: A

9. The Sensex is based on:

   • A) 50 stocks
   • B) 13 sectors
   • C) 30 stocks
   • D) 25 sectors
     Answer: C

10. Which index is often referred to as 'Headline Inflation'?

    • A) Consumer Price Index
    • B) Wholesale Price Index
    • C) Sensex
    • D) Human Development Index
      Answer: B

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Methods of Construction

11. Which method uses base-year quantities as weights?

    • A) Paasche's Index
    • B) Laspeyre’s Index
    • C) Simple Aggregative Index
    • D) Quantity Index
      Answer: B

12. Paasche’s index uses weights from:

    • A) The base period
    • B) The current period
    • C) A future period
    • D) A mix of base and current periods
      Answer: B

13. What is a simple aggregative price index?

    • A) The ratio of current prices to base prices
    • B) Sum of current prices divided by sum of base prices, multiplied by 100
    • C) Weighted average of current prices
    • D) Average of price relatives
      Answer: B

14. The weighted price relative index formula is:

    • A) $\frac{\sum W \cdot P_1}{\sum W \cdot P_0} \times 100$
    • B) $\frac{\sum P_1}{\sum P_0}$
    • C) $\frac{\sum W}{P_0} \times 100$
    • D) $\frac{\sum P_1}{P_0 \cdot W}$
      Answer: A

15. What is a major limitation of a simple index number?

    • A) Too complex to calculate
    • B) Does not account for weight differences among items
    • C) Only measures wholesale prices
    • D) Requires constant updating
      Answer: B

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Applications and Use-Cases

16. Which index is widely used for stock market performance?

    • A) Human Development Index
    • B) Consumer Price Index
    • C) Sensex
    • D) Wholesale Price Index
      Answer: C

17. What does an index number above 100 in CPI indicate?

    • A) Lower cost of living
    • B) Higher cost of living
    • C) No change in cost of living
    • D) Data inconsistency
      Answer: B

18. What does the Human Development Index (HDI) measure?

    • A) Inflation rates
    • B) Economic policy impacts
    • C) Overall country development
    • D) Industrial production
      Answer: C

19. Which index helps measure agricultural sector performance?

    • A) Wholesale Price Index
    • B) Consumer Price Index
    • C) Agricultural Production Index
    • D) Index of Industrial Production
      Answer: C

20. What does the Consumer Food Price Index exclude?

• A) Alcoholic beverages
• B) Prepared meals and snacks
• C) Food grains
• D) Both A and B
  Answer: D

Calculations and Interpretation

21. In Laspeyre's index, an increase in prices affects the index because:

    • A) Base-year quantities are fixed
    • B) Current-year quantities vary
    • C) The base year changes frequently
    • D) It uses averages of base and current weights
      Answer: A

22. The CPI for industrial workers was 277 in December 2014. What does this mean?

    • A) Prices doubled since 2001
    • B) Prices increased by 177% compared to 2001
    • C) Prices decreased by 177% compared to 2001
    • D) No significant change since 2001
      Answer: B

23. What is the base-year weighted price index formula?

    • A) $\frac{\sum (P_1 \cdot Q_0)}{\sum (P_0 \cdot Q_0)} \times 100$
    • B) $\frac{\sum (P_1 \cdot Q_1)}{\sum (P_0 \cdot Q_0)} \times 100$
    • C) $\frac{\sum P_1}{\sum P_0} \times 100$
    • D) $\frac{\sum Q_1}{\sum Q_0} \times 100$
      Answer: A

24. If a salary was Rs 4,000 in the base year, and the CPI is 200, what is the equivalent salary today?

    • A) Rs 6,000
    • B) Rs 8,000
    • C) Rs 10,000
    • D) Rs 12,000
      Answer: B

25. If the CPI is 150, by how much should wages be adjusted?

    • A) 50% increase
    • B) 100% increase
    • C) 150% increase
    • D) No change needed
      Answer: A

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Consumer Price Index (CPI)

26. Which of the following has the highest weight in the CPI for industrial workers?

    • A) Fuel
    • B) Housing
    • C) Food
    • D) Clothing
      Answer: C

27. Why is it essential to have different CPI indices for different consumer groups?

    • A) To simplify calculations
    • B) Because consumption patterns vary across groups
    • C) To reduce inflation
    • D) To measure wholesale price changes
      Answer: B

28. CPI excludes which of the following items?

    • A) Food and beverages
    • B) Services like barber charges
    • C) Housing
    • D) Fuel
      Answer: B

29. The formula for calculating real wages is:

    • A) $\text{Real Wage} = \frac{\text{Money Wage}}{\text{Cost of Living Index}} \times 100$
    • B) $\text{Real Wage} = \frac{\text{Money Wage}}{\text{CPI}} \times 100$
    • C) $\text{Real Wage} = \frac{\text{Cost of Living Index}}{\text{Money Wage}} \times 100$
    • D) Both A and B
      Answer: D

30. What does an index of 526 (1982 = 100) indicate about the purchasing power of Rs 1?

    • A) Rs 1 is worth 50 paise in 1982
    • B) Rs 1 is worth 19 paise in 1982
    • C) Rs 1 is worth Rs 5.26 in 1982
    • D) Rs 1 has the same purchasing power
      Answer: B

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Wholesale Price Index (WPI)

31. The WPI is used primarily to measure:

    • A) Retail price changes
    • B) Inflation
    • C) Agricultural production
    • D) Stock market performance
      Answer: B

32. What does a WPI of 253 (base 2004-05) in October 2014 signify?

    • A) General price level rose by 153%
    • B) General price level fell by 153%
    • C) Prices are stable since 2004-05
    • D) No significant change occurred
      Answer: A

33. The main components of WPI include:

    • A) Food and beverages
    • B) Manufactured products, primary articles, fuel and power
    • C) Services like healthcare and education
    • D) Real estate and housing
      Answer: B

34. Core inflation in WPI excludes:

    • A) Food and fuel
    • B) Manufactured goods
    • C) Primary articles
    • D) Consumer goods
      Answer: A

35. The 'WPI Food Index' constitutes what percentage of the WPI?

    • A) 22%
    • B) 24.23%
    • C) 50%
    • D) 10%
      Answer: B

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Other Indices

36. What is the base year for the Index of Industrial Production (IIP) as of 2017?

    • A) 2004-05
    • B) 2011-12
    • C) 2012-13
    • D) 2010-11
      Answer: B

37. The weightage of manufacturing in the IIP is:

    • A) 14.4%
    • B) 77.6%
    • C) 34.1%
    • D) 8%
      Answer: B

38. Which of the following are core industries in the IIP?

    • A) Steel, cement, electricity
    • B) Agriculture, mining, steel
    • C) Banking, finance, electricity
    • D) Oil, gas, textiles
      Answer: A

39. The HDI considers which of the following dimensions?

    • A) Health, education, income
    • B) Industry, agriculture, technology
    • C) Price, quantity, wages
    • D) Infrastructure, housing, transport
      Answer: A

40. Which index is used to evaluate inflation's impact on purchasing power?

    • A) WPI
    • B) CPI
    • C) IIP
    • D) Sensex
      Answer: B

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Conceptual Understanding

41. What is a "headline inflation" primarily based on?

    • A) CPI
    • B) WPI
    • C) HDI
    • D) Core Inflation Index
      Answer: B

42. Why is the base year updated frequently for indices?

    • A) To reflect recent economic conditions and relevance
    • B) To simplify calculations
    • C) To reduce inflation rates artificially
    • D) To maintain consistency with international standards
      Answer: A

43. Why are weights important in index numbers?

    • A) To give equal importance to all commodities
    • B) To reflect the relative importance of items
    • C) To avoid mathematical errors
    • D) To simplify formulas
      Answer: B

44. What is the purpose of constructing an agricultural production index?

    • A) To track wholesale prices
    • B) To measure production trends in agriculture
    • C) To evaluate stock market performance
    • D) To adjust consumer prices
      Answer: B

45. How does the sensex influence economic decisions?

    • A) Reflects investor confidence in the economy
    • B) Measures retail price changes
    • C) Tracks wholesale price movements
    • D) Determines agricultural productivity
      Answer: A

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Practical Applications

46. The formula for inflation rate based on WPI is:

    • A) $\frac{\text{WPI}_{t} - \text{WPI}_{t-1}}{\text{WPI}_{t-1}} \times 100$
    • B) $\frac{\text{WPI}_{t-1} - \text{WPI}_{t}}{\text{WPI}_{t-1}} \times 100$
    • C) $\frac{\text{WPI}_{t} - \text{CPI}_{t-1}}{\text{CPI}_{t-1}} \times 100$
    • D) $\frac{\text{CPI}_{t} - \text{WPI}_{t-1}}{\text{CPI}_{t-1}} \times 100$
      Answer: A

47. How do CPI and WPI differ in terms of coverage?

    • A) CPI includes services, WPI does not
    • B) WPI includes services, CPI does not
    • C) Both include wholesale and retail prices
    • D) Neither includes manufactured goods
      Answer: A

47. What does "core inflation" focus on?

    • A) Prices excluding food and fuel
    • B) Consumer goods
    • C) Agricultural products
    • D) Both A and B
      Answer: A

48. What is the significance of IIP in economic analysis?

    • A) Tracks industrial growth and production trends
    • B) Measures retail price changes
    • C) Tracks agricultural performance
    • D) Measures inflation
      Answer: A

49. What are some issues in constructing an index number?

• A) Selecting representative items
• B) Choosing a normal base year
• C) Deciding on appropriate weights
• D) All of the above
  Answer: D

How These MCQs Can Help You Excel in CUET, CTET, SSC, TET, CLAT, IFC, and SPSC Entrance Exams

Preparing for competitive exams like CUET, CTET, SSC, TET, CLAT, IFC, and SPSC can be overwhelming. The right preparation strategy involves focusing on Multiple-Choice Questions (MCQs) tailored for these exams. Here's how practicing MCQs can help boost your performance and secure your success:

Why MCQs Are Essential for Entrance Exams

1. Covers Key Concepts:
   These exams often test your understanding of fundamental concepts. Practicing MCQs ensures comprehensive coverage of topics ranging from General Awareness, Quantitative Aptitude, Logical Reasoning, and Language Proficiency.

2. Time Management:
   Entrance exams are time-bound. Regular practice with MCQs helps improve speed and accuracy, enabling you to answer more questions within the allotted time.

3. Exam-Specific Patterns:
   Each exam has a unique pattern. These MCQs are curated to match the exact format of CUET, CTET, SSC, TET, CLAT, IFC, and SPSC entrance tests, ensuring you're well-prepared for the actual challenge.

4. Boost Confidence:
   Solving MCQs simulates the real exam environment, reducing stress and building confidence for the final test.

Key Benefits of Practicing These MCQs

• CUET: Focuses on subject-specific aptitude for university admissions.
• CTET/TET: Enhances your pedagogy and teaching methodology knowledge.
• SSC/SPSC: Sharpens your general knowledge and reasoning skills for government job exams.
• CLAT: Prepares you for legal aptitude and reasoning sections in law entrance tests.
• IFC: Develops your analytical and problem-solving abilities for financial sector roles.

Pro Tips for Maximizing Your MCQ Practice

• Start with topic-wise MCQs to build a strong foundation.
• Regularly attempt mock tests to assess your progress.
• Review detailed explanations for every answer to clear your doubts.
• Focus on frequently asked questions from previous years’ papers.

Conclusion

These MCQs are your stepping stones to cracking competitive exams like CUET, CTET, SSC, TET, CLAT, IFC, and SPSC. Make them a part of your daily study routine and witness significant improvement in your performance.