The Paasche price index tends to ______ the true increase in prices if consumers substitute away from goods that have become more expensive. MCQ with Answer and Explanation

Question
The Paasche price index tends to ______ the true increase in prices if consumers substitute away from goods that have become more expensive.
A. Overstate
B. Understate
C. Exactly measure
D. Not measure
Answer: Option B
Solution (By JKSSB Mock Tests)
Paasche uses current period quantities; substitution away from expensive items reduces their weight, leading to understatement.
This question belongs to: Accountancy and Statistics Statistics
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Practice More Statistics Questions

Question #1
Which measure of central tendency is most affected by extreme values?
A. Median
B. Arithmetic mean
C. Mode
D. Geometric mean
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Correct Answer: Option B

Explanation:
The arithmetic mean uses all values and is pulled towards outliers.
This question belongs to: Accountancy and Statistics Statistics
Question #2
The person who fills the schedule is the:
A. Statistician
B. Enumerator
C. Respondent
D. Sponsor
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Correct Answer: Option B

Explanation:
In the schedule method, the enumerator records the responses given by the informant.
This question belongs to: Accountancy and Statistics Statistics
Question #3
Which of the following is true about the mode?
A. Can be more than one
B. Always less than mean
C. Always unique
D. Always equal to median
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Correct Answer: Option A

Explanation:
A distribution can be bimodal or multimodal.
This question belongs to: Accountancy and Statistics Statistics
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