A price index that compares prices in a given year to prices in a fixed base year:
A) must contain at least two base years.
B) may mask the effects of year-to-year changes in prices.
C) measures changes in employment better than it measures changes in prices.
D) all of the above.

Question

Quizplus · Accepted Answer

A price index that compares prices in a given year to prices in a fixed base year can indeed mask the effects of year-to-year changes in prices, because it focuses on the comparison to one specific year, potentially overlooking fluctuations that occur in the interim years.

A Price Index That Compares Prices in a Given Year