- CFA Exams
- CFA Level I Exam
- Topic 2. Economics
- Learning Module 11. Understanding Business Cycles
- Subject 7. Inflation

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**CFA Practice Question**

The following dataset shows the change of a consumption basket over time:

2014 (price/quantity)- Bread: $0.80/52; Milk: $1.24/28

B. $0.80 x 52 + 1.24 x 28

C. $0.77 x 52 + 1.22 x 28

2013 (price/quantity)- Bread: $0.77/50; Milk: $1.22/30

2014 (price/quantity)- Bread: $0.80/52; Milk: $1.24/28

The denominator of the Laspeyres index should be calculated as ______.

A. $0.77 x 50 + 1.22 x 30

B. $0.80 x 52 + 1.24 x 28

C. $0.77 x 52 + 1.22 x 28

Correct Answer: A

The Laspeyres index uses the same quantity data from only the base period. B is the numerator and C is the denominator of the Paasche index.

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**User Contributed Comments**
7

User |
Comment |
---|---|

davcer |
paasche is old composition at current prices/old composition at base prices the mock exam morning sessions put it this way |

davcer |
sorry I was wrong, paasche uses current composition |

Shaan23 |
I always think of Laspereyes as LAST in the denominator. Old stuff |

schweitzdm |
Based off of this question's respective reading I had no idea how to answer it. |

tangyjab |
The numerator of the Laspeyres index should be 0.80 x 50 + 1.24 x 30 |

cfastudypl |
tangyjab, please read the comment to the answer as you are wrong. |

sshetty2 |
I don't think tangy is wrong... |