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What is an index

1. What is an index? Why do we use indices? What are the different types of indices? How is each type of index used? The Consumer Price Index (CPI) is one index mentioned in business news reports. What other index numbers do you feel would be helpful for organizations to run their business and why?

2. Are weighted indices more valuable than unweighted indices? Why? How is the base year of an index selected? Why is the base year important to the data? Is forecasting independent of indexing? Are forecasting and indexing ever used together? If so, how?

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An index is a single number calculated from a set of prices or of quantities. Indices allow us to compare quantities from different times (if you do not use indices, you have to compare many numbers, but indices combine those numbers into one and you can easily compare).

Common examples of indices include:

Stock Indices (average of stock prices that allows users and businesses to track how the market is performing)
Dow Jones (an average of 30 stock prices),
S&P 500 (an average of 500 stocks)

Quantity Indices (an average of quantities and numbers, allows easy economic analysis and forecasting)

GDP (an average of economic outputs)
Unemployment rate (an average of many unemployment from different regions)
CPI (an average price of ...