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Chapter 22: Q 12 (page 553)

Why do economists use index numbers to measure the price level rather than dollar value of goods?

Short Answer

Expert verified

It is easy as compared to dollar value of goods.

Step by step solution

01

Step 1. Index number

it is a measure of change of magnitude of variable or between group of variables. It is a statistical device.

02

Step 2. Reason

To index numbers there are no units attached to it. Because of this reason they are easy to compare price levels over period of time.

in addition to this results are also more accurate in case of complex arrangement of goods and services by interpreting using index numbers.

so that is why economists use index numbers to measure the price level rather than dollar value of goods.

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