Question

For preparing consumer price index of 2020, the prices of which year would be used for comparison?

• A. Current year
• B. Base year
• C. 2023
• D. 1947

Hint:

The base year is used to calculate the Consumer Price Index (CPI), allowing for comparisons of current prices against the selected base year.

Answer 1

The Correct Option is B

Step 1: Understanding base year in CPI.
When preparing a consumer price index (CPI) for a given year, the prices from the base year are used for comparison. The base year is the reference year for which the prices of goods and services are set at a value of 100. The comparison is made to assess inflation or deflation.

Step 2: Analyzing the options.
(A) Current year: This is incorrect, as prices of the current year are compared to those of the base year, not to itself.
(B) Base year: Correct. The prices of the base year are used for comparison when calculating the CPI.
(C) 2023: This is incorrect, as the CPI for 2020 would use a base year, not 2023.
(D) 1947: This is incorrect, as the base year for CPI calculations is not fixed and may not be 1947.

Step 3: Conclusion.
The correct answer is (B) Base year, as CPI is calculated by comparing the current year's prices to the base year.