Statistics: Index Numbers · Class 11 · CBSE · Commerce Economics
Why should the base year selected for constructing an index number be a normal year? State one additional desirable feature of a base year.
Practice question from Statistics: Index Numbers (Class 11 · CBSE · Commerce Economics), with the correct answer and a step-by-step solution.
medium · Subjective · Q-0C38C0
Why should the base year selected for constructing an index number be a normal year? State one additional desirable feature of a base year.
Answer: The base year should be a normal year without abnormal events such as wars, floods, strikes or severe economic disturbances, because such events may make the comparison misleading. It should also be reasonably recent and representative of the usual economic conditions.
Solution
A normal base year provides a meaningful standard for comparison. Abnormal conditions can distort prices, quantities and expenditure patterns, while a recent and representative year keeps the index relevant.
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