True or False
State with reason whether you agree or disagree with the following statement:
Index numbers can be constructed without the base year.
I disagree with the above statement.
- An index number is a device to measure changes in an economic variable over a period of time.
- The year with which the changes are measured is termed as the base year.
- In other words, the year with respect to which comparisons are made is the base year.
- The base year is denoted by the suffix ‘o’.
- If there is no base year, there will be no base against which current year variables can be measured.
- Hence, it is not possible to construct index numbers without the base year.
Concept: Limitations of Index Numbers
Is there an error in this question or solution?