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

Consumer Price Index (CPI) =

A measure of inflation that tracks changes in price level of a representative basket of goods & services within an economy.

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