In computing a price index,
A) the most recent year is always set equal to 100.
B) both the quantities in the market basket and the prices change from year to year.
C) the quantities in the market basket stay the same while the prices differ.
D) the base year must be one for which the inflation rate was zero.

Question

Quizplus · Accepted Answer

In computing a price index, the quantities in the market basket stay the same while the prices differ. This ensures a consistent comparison across different time periods. The most recent year is not always set equal to 100, and the base year does not necessarily have to have zero inflation. Both the quantities in the market basket and the prices can change from year to year, but the key is to keep the quantities in the market basket constant.

In Computing a Price Index