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How is the base year of an index selected?

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How is the base year of an index selected? Why is the base year important to the data?

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Solution Summary

Your response is 197 words and tells you why the base year is important and some basic rules for selecting a base year. Discussion is suitable for a novice.

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I am going to answer the second question first.

The base year is important because the future years use it as the model for a normal year. If you don't pick a normal year, the index will fluctuate during normal years and not in a wild swing that happens to match the base year.

Now, for the first ...

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