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