-If year 3 is the base year:
A) the price index number for year 3 is 500.0.
B) the price index number for year 4 is greater than 100.0.
C) the price index number for year 4 is 0.20.
D) the price index numbers for years 1 and 2 are less than zero.

Question

-If year 3 is the base year:
A) the price index number for year 3 is 500.0. 
B) the price index number for year 4 is greater than 100.0. 
C) the price index number for year 4 is 0.20. 
D) the price index numbers for years 1 and 2 are less than zero.

Quizplus · Accepted Answer

When year 3 is the base year, the price index for that year is always 100.0, not 500.0, making option A incorrect. A price index number greater than 100.0 in year 4 (option B) indicates that prices have increased from the base year, which is a plausible scenario. Option C is incorrect because price index numbers are typically expressed as a number around 100, not as a decimal like 0.20, which would imply a 98% decrease in prices, an unlikely scenario. Option D is incorrect because price index numbers cannot be less than zero; they represent a comparison of prices to a base year, not negative values.

-If Year 3 Is the Base Year