CA Foundation · Quantitative Aptitude · Index Numbers
A firm wants to find out whether the real purchasing power of its employees' wages has improved over the last five years. Which index number would be most directly useful for this purpose?
The Consumer Price Index for the relevant class of workers is most useful, because it measures changes in the retail prices of goods and services consumed by them. Dividing money wages by this index gives real wages, showing whether purchasing power has improved.
- AWholesale Price Index of industrial raw materials
- BConsumer Price Index for the relevant class of workersCorrect
- CIndex of Industrial Production
- DSensex-type share price index
Explanation
Real purchasing power of wages is found by deflating money wages by the cost of living, which is measured by the Consumer Price Index for the relevant class of workers. WPI, IIP and share price indices do not measure the retail prices paid by consumers.
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