PRC-2 · Chapter 9 · Question 50 of 60
What is a massive, practical advantage of utilizing a 'Chain Base Index' method rather than a Fixed Base Index?
Test yourself: pick an answer
Reveal answer & explanation
Correct answer: B) It allows obsolete commodities to be seamlessly dropped and new commodities introduced into the basket each year.
Explanation
Because a chain base index calculates links by strictly comparing the current year to the immediate preceding year, the consumer basket can be freely updated annually, making it highly responsive to shifting economic trends.
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