What is the main use of a base year?
Answer and explanation
Correct answer: To measure output at constant prices
A base year provides the reference prices used to calculate real GDP and compare output across different years. Valuing current quantities at base-year prices holds prices constant, so changes in measured GDP more closely reflect changes in physical production rather than inflation. Therefore, option A is correct. Tax collection, imports, and population counting may be studied separately but are not the main purpose of a base year.
Frequently asked questions
What is the correct answer to this question?
To measure output at constant prices
Why is this the correct answer?
A base year provides the reference prices used to calculate real GDP and compare output across different years. Valuing current quantities at base-year prices holds prices constant, so changes in measured GDP more closely reflect changes in physical production rather than inflation. Therefore, option A is correct. Tax collection, imports, and population counting may be studied separately but are not the main purpose of a base year.
Which subject and chapter does this question cover?
This is a Class 11 Economics question. Chapter: National Income and Related Aggregates. Topic: GDP and Welfare.
