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What is the main purpose of linking adjacent years in a chain price index?

Answer and explanation

Correct answer: To incorporate changing weights progressively over time

A chain price index links price changes from one period to the next instead of comparing every period only with a distant fixed base year. This permits expenditure or output weights to be updated progressively as the structure of the economy changes. Option A is correct. The method does not equalise prices, reclassify imports as domestic output, or keep nominal GDP constant; those claims confuse measurement with economic outcomes.

Related tags

Chain Price IndexChanging WeightsAdjacent YearsGdp DeflatorIndex NumbersGdp And WelfareNational Income And Related AggregatesEconomics

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