Index NumbersMCQPYQ Nov. 19Question 3879 of 197
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The index number of prices at place in the year 2008 is 225 with 2004 as the base then there is:

Options

A125%\displaystyle 125\% increase
B225%\displaystyle 225\% increase
C110%\displaystyle 110\% increase
D25%\displaystyle 25\% increase
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Correct Answer

Option a125%\displaystyle 125\% increase

All Options:

  • A125%\displaystyle 125\% increase
  • B225%\displaystyle 225\% increase
  • C110%\displaystyle 110\% increase
  • D25%\displaystyle 25\% increase

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Detailed Solution & Explanation

An index number measures changes relative to a base period, where the base period index is always set to 100%\displaystyle 100\%. If the price index of a place in the current year is 225, it means that the price level has reached 225\% of the base year price level. The average percentage increase in prices is: Percentage Increase=Price Index100%=225%100%=125%\text{Percentage Increase} = \text{Price Index} - 100\% = 225\% - 100\% = 125\% Thus, there has been on average a 125\% increase in prices. *(Note: Although some answer keys incorrectly point to Option B due to confusing the price level with the price increase, mathematically, the increase is exactly 125\%).* Hence, **Option A** 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.

Key Concepts to Understand

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