To measure consumer price index (CPI) which of the following years are taken into consideration?

(A) Current Year.

(B) Preceeding Year.

(C) Base Year.

(D) Succeeding Year

Choose the correct answer from the options given below:

The correct option is (A) and (C) only.

Step-by-step Explanation:

1. Understanding the Consumer Price Index (CPI):
The Consumer Price Index (CPI) is a critical economic indicator used to measure the average change over time in the prices paid by urban consumers for a market basket of consumer goods and services. It is widely used to identify periods of inflation or deflation.

2. The CPI Formula:
To calculate the CPI, we compare the cost of the market basket in a specific period to its cost in a designated reference period. The mathematical formula is represented as:

$$\text{CPI}=\frac{{\text{Cost of Market Basket in Current Year}}_{}}{{\text{Cost of Market Basket in Base Year}}_{}}\times 100$$

3. Analyzing the Years Taken into Consideration:
Based on the formula and calculation methodology of CPI:
• Current Year (A): This is the year for which we want to find the price index or inflation rate. The prices of goods and services in this year are measured.
• Base Year (C): This is the benchmark or reference year with which the current year's prices are compared. The CPI for the base year is always normalized to 100.
• Preceding years (B) and succeeding years (D) are not directly part of the standard CPI calculation formula for a specific period comparison, although historical trends may look at preceding years.

4. Conclusion:
Therefore, only the Current Year and the Base Year are taken into consideration to measure the Consumer Price Index. This corresponds to statements (A) and (C) only.