Mention any 2 points that are to be considered while selecting the base period
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Basic consideration underlying the choice of base period.
1. The base period should be a normal period. Abnormal periods like period of war or floods etc. should not be selected as a base year.
2. The base period should be neither too short nor too long.
3. It should not be the period for which actual data are not available.
4. It should not be the too far back in the past.
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The main factor to consider is the economic environment of the base period. The base period should have relatively stable economic performance. For example, when constructing an index number you may not consider 2008 as a base year. You would need to consider a period when the economy performed fairly well with neither runover inflation nor recession. Basically, look for a period that would be considered as a middle ‘ground’ between high performance and low performance indicators.
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