Index numbers are 'economic barometers'. Explain this statement. - Vidyadip

Question

Index numbers are 'economic barometers'. Explain this statement.

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Answer

Index numbers are used as economic barometers. Index number is a special type of averages which helps to measure the economic fluctuations on price level, money market, economic cycle like inflation, deflation etc. G.Simpson and F.Kafka They are used to take the pulse of economy and they are used as indicators of inflation or deflation tendencies. So index numbers are called economic barometers.

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