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

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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.

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The 20 questions

  1. What is the primary purpose of a price index?

    • Calculate tax rates
    • Measure total output
    • Fix interest rates
    • Track price changes

  2. If an index series shows 112 with a base year of 100, what has occurred?

    • 1.2% increase
    • 12 unit fall
    • 112% increase
    • 12% increase

  3. A basket costs £200 in the base year and £230 currently. What is the new index value?

    • 120
    • 115
    • 130
    • 230

  4. An index rises from 105 in 2020 to 110 in 2021. Rebased to 2020 = 100, what is the 2021 value?

    • 100.0
    • 105.0
    • 104.8
    • 110.0

  5. Why are weights applied to items in a price index basket?

    • Reflect spending patterns
    • Predict future inflation
    • Equalise item prices
    • Reduce calculation steps

  6. If prices rise by 4% and nominal wages rise by 3%, what happens to real wages?

    • Fall by 1%
    • Rise by 7%
    • Fall by 7%
    • Rise by 1%

  7. What is a major limitation of using a fixed basket of goods in price indices?

    • Excludes services entirely
    • Calculates wages incorrectly
    • Ignores interest rates
    • Ignores changing habits

  8. Why can a fixed-weight price index overstate the true rate of inflation?

    • Includes export prices
    • Ignores consumer substitution
    • Uses outdated calculations
    • Omits direct taxation

  9. If the CPI rises from 125 to 131.25, what is the annual rate of inflation?

    • 5%
    • 25%
    • 6.25%
    • 12.5%

  10. In an index number series, what numerical value is assigned to the base year?

    • 10
    • 100
    • 0
    • 1

  11. What is a main economic use of index numbers?

    • Calculating interest levels
    • Comparing macro variables
    • Fixing currency prices
    • Setting tax rates

  12. If the nominal wage index is 150 and the CPI is 120, what is the real wage index?

    • 30
    • 125
    • 130
    • 180

  13. Why is using a very old base year for an index number series problematic?

    • Constant negative values
    • Outdated spending patterns
    • Inaccurate base price
    • Higher tax calculations

  14. A base-year salary is £24,000. If the price index rises to 115, what salary maintains purchasing power?

    • £24,115
    • £28,000
    • £27,600
    • £25,200

  15. Why can different inflation index numbers yield contrasting results?

    • Changing tax brackets
    • Errors in arithmetic
    • Different basket choices
    • Fixed interest rates

  16. What process uses a price index to convert nominal GDP into real GDP?

    • Weighting
    • Compounding
    • Inflating
    • Deflating

  17. A basket costs £50 in the base year and £60 in 2020. What is the 2020 price index?

    • 115
    • 120
    • 125
    • 110

  18. If nominal income rises by 5% and prices rise by 8%, what is the change in real income?

    • 3% decrease
    • 13% increase
    • 13% decrease
    • 3% increase

  19. Food has a weight of 40%. If food prices rise by 10%, how much does the index rise?

    • 40%
    • 4%
    • 0.4%
    • 10%

  20. What is the main purpose of rebasing an index number series?

    • Increase inflation
    • Eliminate raw data
    • Update base year
    • Remove weightings

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