Price index interpretation (base year 1960): If the current price index is approximately 330, what does this imply? Context: Treat 1960 as base = 100 and interpret the relative level of prices today. Choose the correct interpretation.
General Knowledge
Indian Economy
Difficulty: Easy
Choose an option
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AAverage prices are about 3.3 times the 1960 level (approximately a 230% rise)
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BAverage prices are about 2.3 times the 1960 level (approximately a 130% rise)
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CAverage prices have fallen by about 70% from the 1960 level
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DAverage prices are unchanged compared to 1960
Answer
Correct Answer: Average prices are about 3.3 times the 1960 level (approximately a 230% rise)
Explanation
Given data
- Index number today: 330.
- Base year (1960) index: 100.
Concept / Approach A price index of 330 (base 100) means the average price level is 330/100 times the base.
Step-by-step calculation Relative level = 330 / 100 = 3.30. Percentage change from base = (330 − 100) / 100 × 100% = 230%.
Verification 3.30 times equals a 230% increase over the base (since 100% would be 2.00×, 200% would be 3.00×, and 230% is 3.30×).
Common pitfalls Confusing the index value (330) with the percentage increase (230%).
Final Answer Average prices are about 3.3 times the 1960 level, i.e., roughly a 230% rise.