4.2.1.3 - Uses of Index Numbers

Index Number

- A unit-free number used in an index to enable ACCURATE COMPARISONS to be made

- The base year index number is typically 100

- Changes over time are expressed in percentage terms around the base

Index Numbers

Are a mathematical technique used to convert actual numbers over time into easily comparable index numbers. These can be used to more easily compare economic performance over time (compared to base year) either within or across economies.

Consumer Price Index (CPI)

Shows changes in price level within an economy (inflation)

Human Development Index

Used to compare economic development across countries/within a country over a period of time.

(GNI per Capita, Mean Years of Schooling, Life Expectancy)

Effective Exchange Rate Index

The value of a country's currency relative to a trade weighted basket of other currencies.

Sterling Trade Weighted Index

Shows changes in exchange rates weighted to value of trade undertaken with various countries

Index # =

(Raw Number / Base Year Raw Number) x 100

Weighted Index =

Index x Weight (%)|

An average index made up of a combination of other indices