Question

If consumer price index for 2023 is being prepared in which prices would be compared with 2010 prices, then what are 2023 and 2010 respectively?

• A. Base year, current year
• B. Current year, current year
• C. Current year, base year
• D. Base year, base year

Hint:

The base year is used as a benchmark for comparing the current year's prices in the consumer price index (CPI).

Answer 1

The Correct Option is C

Step 1: Understanding the consumer price index.
The consumer price index (CPI) is a measure that examines the weighted average of prices of a basket of consumer goods and services. The year selected as the comparison point is known as the base year. Prices in the current year are compared to those in the base year to calculate the CPI.

Step 2: Analyzing the options.
(A) Base year, current year: This is incorrect because the base year and current year cannot be swapped when calculating CPI.
(B) Current year, current year: This is incorrect as both the years must not be the current year. The base year must be one that is used for comparison.
(C) Current year, base year: Correct. The consumer price index compares prices in the current year to those of the base year (in this case, 2010).
(D) Base year, base year: This is incorrect, as CPI requires a comparison of the current year to the base year, not the base year to itself.

Step 3: Conclusion.
The correct answer is (C) Current year, base year, as the CPI compares the current year's prices with those of the base year.