Question

Match the following

Group A	Group B
1. Economic barometers	a) 100
2. Cost of living	b) Relative importance
3. Base year’s index number	c) Standard of living
	d) Index numbers

Answer 1

Group A	Group B
1. Economic barometers	a) Index numbers
2. Cost of living	b) Standard of living importance
3. Base year’s index number	c) 100

Explanation
1. Index numbers are used to measure economic performance and other economic variables of an economy when compared in different periods of time.
2. Cost of living and standard of living are two variables that are inversely proportional to each other. This implies that higher the cost of living, lower is the standard of living and vice-versa.
3. The base year is the year in relation to which the changes in the current year are measured. The index number for the base year is always taken as 100. Algebraically,

Base year’s index number $=\frac{\sum p_0}{\sum p_0}\times 100=100$