Price indexes like the CPI are calculated using a base year. The term base year refers to:
A) the first year that price data are available.
B) any year in which inflation was higher than 5 percent.
C) the most recent year in which the business cycle hit the trough.
D) an arbitrarily chosen reference year.

Question

Quizplus · Accepted Answer

The base year is an arbitrarily chosen reference year that serves as a benchmark for calculating price indexes such as the CPI. It is typically chosen to be a year with a stable price level, so that subsequent changes in prices can be measured relative to that year.

Price Indexes Like the CPI Are Calculated Using a Base