As chief statistician for the municipality, you want to compute and publish every year a special-purpose index, which you plan to call Index of Municipal Business Activity. Three series seem to hold promise as the basis for the index; namely, the price of wheat, the number of new automobiles sold and the rate of money turnover for the municipality (published by a local bank). Arbitrarily you decide that money turnover should have a weight of 60 percent; number of new automobiles sold, 30 percent; and the price of wheat, 10 percent. What is the Index of Municipal Business Activity for 2010 (the base year) and for 2014?
A) 100 for 2010, 139 for 2014
B) 139 for 2010, 100 for 2014
C) 100 for 2010, 61 for 2014
D) 100 for 2010, 100 for 2014
E) 100 for 2010, 160 for 2014

Question

As chief statistician for the municipality, you want to compute and publish every year a special-purpose index, which you plan to call Index of Municipal Business Activity. Three series seem to hold promise as the basis for the index; namely, the price of wheat, the number of new automobiles sold and the rate of money turnover for the municipality (published by a local bank). Arbitrarily you decide that money turnover should have a weight of 60 percent; number of new automobiles sold, 30 percent; and the price of wheat, 10 percent.  What is the Index of Municipal Business Activity for 2010 (the base year) and for 2014?
A) 100 for 2010, 139 for 2014 
B) 139 for 2010, 100 for 2014 
C) 100 for 2010, 61 for 2014 
D) 100 for 2010, 100 for 2014 
E) 100 for 2010, 160 for 2014

Quizplus · Accepted Answer

To calculate the index for each year, we need to use the following formula:
Index = (Weighted value of wheat price) + (Weighted value of number of new automobiles sold) + (Weighted value of rate of money turnover)
Index for 2010 = (0.1 x 100) + (0.3 x 1000) + (0.6 x 10) = 100
Index for 2014 = (0.1 x 150) + (0.3 x 1500) + (0.6 x 12) = 139

As Chief Statistician for the Municipality, You Want to Compute