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Index Numbers — Economics STD 11 Commerce — Question

CBSE BoardEnglish MediumSTD 11 CommerceEconomicsIndex Numbers3 Marks
Question
How will you choose a base year for constructing an index number?
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Answer

The base period (base year) is the reference period with which current period (current year) is compared. The selection of the base period is essential while preparing an index number.
Desirable Properties of the Base year: The following are the basic properties (or considerations) underlying the selection of base year:
  1. The base year should be a normal year. It should be free from all sorts of abnormalities or irregular fluctuations. Abnormal year like period of wars, floods etc. should not be selected as the base year.
  2. The base year should neither be too near nor too far.
  3. The base year should not be a year of distant past. It should be a year of recent past.
  4. The base year should not be the period for which actual data is not available.

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