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Consider the following statements regarding Base Year.
1. The base year is a representative year which must not experience any abnormal incidents such asdroughts, floods, earthquakes etc.
2. It gives an idea about changes in purchasing power and allows calculation of inflation-adjusted growthestimates.
Which of the above statements is/are incorrect?
- a)1 only
- b)2 only
- c)Both 1 and 2
- d)Neither 1 nor 2
Correct answer is option 'D'. Can you explain this answer?
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Consider the following statements regarding Base Year.1. The base year...
The base year of the national accounts is chosen to enable inter-year comparisons. It gives an idea about changes in purchasing power and allows calculation of inflation-adjusted growth estimates. The base year prices are termed as at constant prices. This reduces all the data to a comparable benchmark, base year price. The base year is a representative year which must not experience any abnormal incidents such as droughts, floods, earthquakes etc.
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Consider the following statements regarding Base Year.1. The base year...
Base Year is an important concept in economics and statistics, particularly when it comes to measuring inflation and economic growth. It is used as a reference point for comparison in various economic indicators and calculations. Let's evaluate the given statements regarding the base year:
1. The base year is a representative year which must not experience any abnormal incidents such as droughts, floods, earthquakes etc.
This statement is incorrect. The base year is not required to be free from any abnormal incidents. In fact, it is often difficult to find a year without any abnormal incidents because such incidents are inherent to the functioning of an economy. The base year is selected based on certain criteria such as availability of data, stability of economic conditions, and representativeness of the period. It is not necessary for the base year to be free from abnormal incidents.
2. It gives an idea about changes in purchasing power and allows calculation of inflation-adjusted growth estimates.
This statement is correct. One of the primary purposes of selecting a base year is to measure changes in purchasing power and calculate inflation-adjusted growth estimates. By fixing the prices and quantities of goods and services in the base year, economists can compare them with the prices and quantities in subsequent years to determine the changes in purchasing power. This allows for the calculation of inflation-adjusted growth estimates, which provide a more accurate picture of economic growth by accounting for changes in the general price level.
In conclusion, statement 1 is incorrect because the base year is not required to be free from abnormal incidents, and statement 2 is correct because the base year is used to measure changes in purchasing power and calculate inflation-adjusted growth estimates. Therefore, the correct answer is option 'd) Neither 1 nor 2'.
1. The base year is a representative year which must not experience any abnormal incidents such as droughts, floods, earthquakes etc.
This statement is incorrect. The base year is not required to be free from any abnormal incidents. In fact, it is often difficult to find a year without any abnormal incidents because such incidents are inherent to the functioning of an economy. The base year is selected based on certain criteria such as availability of data, stability of economic conditions, and representativeness of the period. It is not necessary for the base year to be free from abnormal incidents.
2. It gives an idea about changes in purchasing power and allows calculation of inflation-adjusted growth estimates.
This statement is correct. One of the primary purposes of selecting a base year is to measure changes in purchasing power and calculate inflation-adjusted growth estimates. By fixing the prices and quantities of goods and services in the base year, economists can compare them with the prices and quantities in subsequent years to determine the changes in purchasing power. This allows for the calculation of inflation-adjusted growth estimates, which provide a more accurate picture of economic growth by accounting for changes in the general price level.
In conclusion, statement 1 is incorrect because the base year is not required to be free from abnormal incidents, and statement 2 is correct because the base year is used to measure changes in purchasing power and calculate inflation-adjusted growth estimates. Therefore, the correct answer is option 'd) Neither 1 nor 2'.
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Consider the following statements regarding Base Year.1. The base year is a representative year which must not experience any abnormal incidents such asdroughts, floods, earthquakes etc.2. It gives an idea about changes in purchasing power and allows calculation of inflation-adjusted growthestimates.Which of the above statements is/are incorrect?a)1 onlyb)2 onlyc)Both 1 and 2d)Neither 1 nor 2Correct answer is option 'D'. Can you explain this answer?
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