Which statement about the relative quantity index is true?

• A. It is less accurate than the aggregate quantity index
• B. It decreases as the number of products grows
• C. It is more accurate than the aggregate quantity index
• D. It ignores non-monetary items

Answer: (C)

Relative quantity indices capture how quantities change for each product separately and then combine those movements. This approach keeps track of the differing quantity trends across products, so it doesn’t hide shifts by lumping everything into a single overall figure. Because the index reflects product-level quantity changes and weights them in a way that respects the actual movements, it tends to give a more accurate picture of total quantity change than an aggregate quantity index, which can mask important variations when the mix of products or their importance changes over time. The takeaway is that focusing on per-product quantity movements and aggregating them thoughtfully reduces potential bias, making the relative quantity index the better choice. The other statements aren’t general truths about this measure—there’s no inherent rule that accuracy falls as more products are added, and handling of non-monetary items depends on the data and method, not on the fundamental advantage of the relative approach.