Question

Why index number are called economic barometers?

Answer 1

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Importance of Index Number in Business Introduction: An index number is a statistical device for comparing the general level of magnitude of a group of related variables in two or more situation. If we want to compare the price level of 2000 with what it was in 1990, we shall have to consider a group of variables such as price of wheat, rice, vegetables, cloth, house rent etc., if the changes are in the same ratio and the same direction; we face no difficulty to find out the general price level...

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Answer 2

Index numbers are economic barometers because they measure price level changes and help in presenting fairly, the economic changes in the society

• Index numbers study the change in living standards and are useful in planning and decision-making.
• Index numbers determine the production levels and they help the government frame policy.
• Index numbers also compare and measure the price of various commodities by using WPI ( wholesale price index).
• The index number of industrial production measures the physical production volume changes.