Economic Data

Question 1

What is an index number?

Answer 1

index number

A measure of some variable, conventionally expressed relative to a base period, which is assigned the value 100.

Question 2

How do we build an Index Number?

Answer 2

• We start by taking the value of the variable at some point in time as the “base” with which the values in other periods will be compared. We call this the base period.
• We then take the output in each subsequent year, called the “given year,” divide it by the output in the base year, and then multiply the result by 100.
• For each index number, the value of output in the base year is equal to 100

Question 3

What is the formula for an index number?

Answer 3

One note, Chapter 2

Question 4

What is the Consumer Price Index (CPI)?

Answer 4

Perhaps the most famous index number used by economists is the index of average prices—the Consumer Price Index (CPI). This is a price index of the average price paid by consumers for the typical collection of goods and services that they buy.

Question 5

What is a weighted average?

Answer 5

Instead, it must be a weighted average, in which the weight assigned to each price index reflects the relative importance of that good in the typical consumer’s basket of goods and services. For example, since the typical consumer spends a tiny fraction of income on sardines but a much larger fraction of income on housing, the weight on the “sardines” price index in the CPI is very small and the weight on the “housing” price index is very large.

Question 6

A single economic variable, such as unemployment, national income, or the average price of a house, can come in two basic forms.

What are they?

Answer 6

Cross-Sectional and Time-Series Data

Question 7

What is Cross-sectional Data?

Answer 7

cross-sectional data
A set of observations of a variable made at the same time across several different units (such as households, firms, or countries).

Question 8

What is time -series Data?

Answer 8

time-series data

A set of observations of a variable made at successive periods of time.

Question 9

What is a Scatter Diagram?

Answer 9

scatter diagram
A graph showing two variables, one measured on the horizontal and the other on the vertical axis. Each point represents the values of the variables for a particular unit of observation.