What may happen to the historical deflator series when the base year is shifted from an old year to a new year?
Answer and explanation
Correct answer: The series may be recalculated while the price trend may remain
Changing the base year changes the reference point and may require historical index values to be rebased or recalculated. The numerical levels can therefore differ from the earlier published series, while the broad direction and pattern of price movements may remain comparable. Option A is correct. Old values do not become zero, every year is not automatically 100, and nominal GDP is not eliminated by rebasing.
Frequently asked questions
What is the correct answer to this question?
The series may be recalculated while the price trend may remain
Why is this the correct answer?
Changing the base year changes the reference point and may require historical index values to be rebased or recalculated. The numerical levels can therefore differ from the earlier published series, while the broad direction and pattern of price movements may remain comparable. Option A is correct. Old values do not become zero, every year is not automatically 100, and nominal GDP is not eliminated by rebasing.
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.
