Which index uses current-period quantities?

• A. Laspeyres
• B. Paasche
• C. Fisher
• D. Tornqvist

Answer: (B)

Think about how the basket of goods is defined in a price index. The Paasche index uses current-period quantities, meaning it values the bundle that consumers actually buy in the period being measured. Numerically, you multiply current-period prices by current-period quantities and compare that to the same basket valued at base prices. This updates the basket with substitution patterns as relative prices change, so the index reflects current spending habits. In contrast, the Laspeyres index sticks with base-period quantities, which can overstate inflation when people substitute toward cheaper goods. The Fisher index combines the two, and Tornqvist uses a weighted average of price changes with expenditure shares.