Laspeyres index tends to ______ the price increase. MCQ with Answer and Explanation

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Laspeyres index tends to ______ the price increase.

A. Overstate

B. Perfectly measure

C. Ignore

D. Understate

Answer: Option A

Solution (By JKSSB Mock Tests)

Because it uses fixed base period quantities, Laspeyres index does not account for substitution away from goods that have become relatively expensive.

This question belongs to: Accountancy and Statistics Statistics

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Practice More Statistics Questions

Question #1

A 'schedule' is more suitable than a questionnaire when:

A. The budget is very limited

B. The informants are illiterate

C. The researcher wants anonymity

D. The area is widespread

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Correct Answer: Option B

Explanation:
Enumerators can assist illiterate respondents, ensuring data collection.

This question belongs to: Accountancy and Statistics Statistics

Question #2

If (AB)=(A)(B)/N, the attributes are:

A. Negatively associated

B. Positively associated

C. Complete association

D. Independent

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Correct Answer: Option D

Explanation:
That equation is the condition for independence of attributes.

This question belongs to: Accountancy and Statistics Statistics

Question #3

Which of the following statements about Laspeyres and Paasche indices is correct?

A. Fisher's index is the geometric mean of Laspeyres and Paasche.

B. Laspeyres index tends to understate price increase, Paasche overstates.

C. Paasche index satisfies the time reversal test.

D. Laspeyres uses current period quantities, Paasche uses base period quantities.

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Correct Answer: Option A

Explanation:
Fisher = √(L×P). L uses base quantities, P uses current quantities. L overstates, P understates. Neither L nor P satisfies time reversal.

This question belongs to: Accountancy and Statistics Statistics

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