Index NumbersMCQMTP May 19 Series II/ MTP Sep 24 IIQuestion 3834 of 197

The formula for conversion to current value

ADeflated value =

\displaystyle \frac{\text{Price Index of the current year}}{\text{previous value}}

BDeflated value =

\displaystyle \frac{\text{current value}}{\text{Price Index of current year}}

CDeflated value =

\displaystyle \frac{\text{Price Index of the previous year}}{\text{previous value}}

DDeflated value =

\displaystyle \frac{\text{Price Index of the previous year}}{\text{previous value}}

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Correct Answer

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

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

To convert a nominal/current value into real terms (constant prices), we use the deflating formula:

\text{Deflated Value} = \frac{\text{Current Value}}{\text{Price Index of Current Year}} \times 100

This is equivalent to:

\text{Deflated Value} = \frac{\text{current value}}{\text{Price Index of current year}}

expressed as a ratio. Hence, **Option B** is the correct answer.

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.

Exam Strategy Tip

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

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