The base period used in computing a price index is
A)The year in which prices were at their lowest level.
B)The year in which prices were at their average level.
C)A fixed reference year from which meaningful comparisons can be made.
D)The earliest year for which data are available.

Question

Quizplus · Accepted Answer

The base period used in computing a price index is a fixed reference year from which meaningful comparisons can be made. This is usually a relatively stable year with a normal level of economic activity and no major supply or demand shocks. Using a fixed reference year allows economists and policymakers to track changes in prices over time and calculate measures such as inflation and cost of living adjustments.

The Base Period Used in Computing a Price Index Is