In computing the consumer price index, a base year is chosen. Which of the following statements about the base year is correct?
A) The base year is always the first year among the years for which computations are being made.
B) It is necessary to designate a base year only in the simplest case of two goods; in more realistic cases, it is not necessary to designate a base year.
C) The value of the consumer price index is always 100 in the base year.
D) All of the above are correct.

Question

Quizplus · Accepted Answer

The base year is typically chosen as a reference point, and all other years are compared to it. Therefore, the value of the consumer price index is always set at 100 for the base year. Choices A and B are incorrect as the base year can be any year and is not necessarily the first year or required only for simplistic cases.

In Computing the Consumer Price Index, a Base Year Is