PRC-2 · Chapter 9 · Question 59 of 60
When maintaining a long-term index series, what is the statistical process known as 'base shifting'?
Test yourself: pick an answer
Reveal answer & explanation
Correct answer: B) Changing the reference period (the year set to 100) to a more recent, economically relevant year.
Explanation
Base shifting occurs when the original base year becomes obsolete due to long-term changing consumer habits. The index is mathematically recalibrated so a more recent year acts as the new 100 baseline.
More Indices MCQs
- Q1Which of the following best describes the fundamental purpose of constructing economic index numbers?
- Q2In the construction of an index number, the period against which all other periods are being compared is technically referred to as the:
- Q3Which standard mathematical formula is used to calculate a 'Simple Price Relative' for a single commodity?
- Q4In the Laspeyres Price Index formula, what specific values are used to weight the prices of the commodities?
- Q5Which characteristic is a primary limitation of using the Paasche Price Index in practice?