Index NumbersMCQMTP May 19 Series II/ MTP Sep 24 IIQuestion 3834 of 197
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The formula for conversion to current value

Select Your Answer (Keyboard: A, B, C, D)
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Correct Answer

✅ Option b — Deflated value = current valuePrice Index of current year\displaystyle current valuePrice Index of current year\displaystyle \frac{\text{current value}}{\text{Price Index of current year}}

All Options:

  • ADeflated value = Price Index of the current yearprevious value\displaystyle Price Index of the current yearprevious value\displaystyle \frac{\text{Price Index of the current year}}{\text{previous value}}
  • BDeflated value = current valuePrice Index of current year\displaystyle current valuePrice Index of current year\displaystyle \frac{\text{current value}}{\text{Price Index of current year}}
  • CDeflated value = Price Index of the previous yearprevious value\displaystyle Price Index of the previous yearprevious value\displaystyle \frac{\text{Price Index of the previous year}}{\text{previous value}}
  • DDeflated value = Price Index of the previous yearprevious value\displaystyle Price Index of the previous yearprevious value\displaystyle \frac{\text{Price Index of the previous year}}{\text{previous value}}

Detailed Solution & Explanation

To convert a nominal/current value into real terms (constant prices), we use the deflating formula: Deflated Value=Current ValuePrice Index of Current Year×100\displaystyle \text{Deflated Value} = \frac{Current Value\displaystyle \text{Current Value}}{Price Index of Current Year\displaystyle \text{Price Index of Current Year}} ×\displaystyle \times 100 This is equivalent to: Deflated Value=current valuePrice Index of current year\displaystyle \text{Deflated Value} = \frac{current value\displaystyle \text{current value}}{Price Index of current year\displaystyle \text{Price Index of current year}} expressed as a ratio. Hence, **Option B** is the correct answer.

About This Chapter: Index Numbers

Paper

Paper 3: Quantitative Aptitude

Weightage

4-6 Marks

Key Topics

Construction of Index Numbers, Time Series

This chapter covers Construction of Index Numbers, Time Series and is part of Paper 3: Quantitative Aptitude in the CA Foundation exam.

View Official ICAI Syllabus

Exam Strategy Tip

This topic carries 4-6 Marks weightage. Focus on understanding core concepts rather than memorizing.

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More Questions from Index Numbers

In price index, when a new commodity is required to be added, which of the following index is used?

Fisher's ideal formula for calculating index number satisfies the ________

Shifted Price Index = Original Price IndexPrice Index of the year on which it has to be shifted×100\displaystyle Original Price IndexPrice Index of the year on which it has to be shifted\displaystyle \frac{\text{Original Price Index}}{\text{Price Index of the year on which it has to be shifted}} ×\displaystyle \times 100

If Laspeyres's Index Number is 250 and Paasche's Index Number is 160, then Fisher's Index number is

If ∑P0q0=240\displaystyle ∑\displaystyle \sum P_0q_0 = 240, ∑P1q0=480\displaystyle ∑\displaystyle \sum P_1q_0 = 480, ∑P0q1=600\displaystyle ∑\displaystyle \sum P_0q_1 = 600 and ∑P1q1=192\displaystyle ∑\displaystyle \sum P_1q_1 = 192, then Laspeyres's Index Number is

If ΣPnqn=249\displaystyle Σ\displaystyle \Sigma P_n q_n = 249, ΣP0q0=150\displaystyle Σ\displaystyle \Sigma P_0 q_0 = 150, ΣPnq0=145\displaystyle Σ\displaystyle \Sigma P_n q_0 = 145 and Paasche's Index Number = 150, then Fisher's Ideal Price Index Number is

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