Question

Consider the following two price index series:


Year 1995 = 100
2002 80
2003 86
2004 90
2005 94


Year 2000 = 100
2005 115
2006 121
2007 130
2008 133


Splice the two index series to form one continuous series with 1995 as the base year. The index for 2005 is:

94


115


81.74


80

Answer 1

To splice the two index series together, we need to create a conversion factor between the two base years (1995 and 2000) and adjust the second series accordingly.

First, we need to calculate the conversion factor.
Conversion Factor = Index in second series for the base year of the first series = 2005 in the second series
Conversion Factor = 115

Now we adjust the second series by multiplying each index value by the conversion factor.
Adjusted second series:
2005: 115
2006: 121 * 115/100 = 139.15
2007: 130 * 115/100 = 149.5
2008: 133 * 115/100 = 152.95

Now we have a continuous index series with 1995 as the base year:
1995: 100
2002: 80
2003: 86
2004: 90
2005: 94
2006: 115
2007: 121
2008: 130

Therefore, the index for 2005 is 94.