Page 248 - Microsoft Word - 00 BA3 IW Prelims STUDENT.docx

Fundamentals of Business Economics

CHAPTER 9 – INDEX NUMBERS

9.1 Consider the following data for country Y:

Year 20X8 NI £500m PI 100

Year 20X9 NI £600m PI 120

where NI = national income and where PI = price index. In real terms, the
economy between 20X8 and 20X9:

A Rose by £100 million

B Rose by £120 million

C Fell by £20 million

D Remained the same

9.2 In January 20X5 the average pay for Grade B workers was $2,000 per month.
There was a contract in force index-linking the pay for the next five years, with
increases effective from 1 January each year, starting in 20X6. Details of the
relevant price index for the last four years are:

Index of prices each January (January 20X0 = 100)

Year 20X5 20X6 20X7 20X8 20X9

Price Index 125 131 136 140 144

The average monthly pay for Grade B workers during 20X9 was (to the
nearest $10):

A $2,060

B $2,300

C $2,500

D $2,800

242