Q.State the uses of Index number.

Index numbers are 'economic barometers' — they measure and compare changes and guide policy, wage-adjustment, deflation and forecasting.

The chief uses of index numbers are:

1. Framing economic/business policy — governments and firms rely on price, production and trade indices to take policy decisions.
2. Measuring changes in the cost of living and hence the purchasing power of money; the cost-of-living index guides dearness-allowance (DA) and wage adjustments.
3. Deflating — money wages, national income and other value series are adjusted for price changes to obtain real values.
4. Studying trends and tendencies in prices, production, exports/imports, etc. over time.
5. Forecasting future economic activity — they act as 'economic barometers' signalling business conditions. …