Question

Suppose that a group of manufacturing firms is asked whether orders for their product have increased, remained about the same, or decreased during the last month. Suppose also that 40% report that orders increased, 40% report that orders decreased, while the remainder reported no change. What would the value of the diffusion index be?

Answer 1

Answer:

The answer is: The diffusion index of that group of manufacturing firms would be 0 (or remain the same if a previous diffusion index had been calculated)

Explanation:

A diffusion index is the common tendency within a group of numbers or statistics to either increase, decrease or remain the same.

The general formula for calculating the DI is:

Diffusion Index (DI) = (Increases−Decreases) + Previous DI Values

In this case, the diffusion index can be calculated by

     Diffusion Index (DI) = (% orders increased - % orders decreased)

     DI = 40% - 40% = 0