The price index for any designated base year must always equal
A) the CPI for that year.
B) 0.
C) 100.
D) one divided by the nominal price change for the year.

Question

Quizplus · Accepted Answer

The price index for any designated base year is supposed to represent the average level of prices over the base year period. Therefore, the index needs to be normalized to a fixed value to make meaningful comparisons over time. Typically, the value of the index is set at 100 for the base year. This means that the indexed price level in any other year can be interpreted as the percentage change of the price level relative to the base year. Therefore, the price index for the base year must always equal 100.

The Price Index for Any Designated Base Year Must Always