Question

measured price changes do not depend on the particular base year chosen when calculating

Answer 1

Answer: Chain-weighted GDP deflator

Traditional GDP deflator is a division of nominal GDP by real GDP and then a multiplication of 100.

GDP deflator =

(Nominal GDP / Real GDP) × 100

Nominal GDP is the product of current year’s quantity and current year’s price.

Real GDP is the product of current year’s quantity and base year’s price.

Since the base year’s price is considered here, the change in price in the current year does depend on that base year.

But, in case of chain-weighted GDP deflator there are so many base years; average of those years’ price is taken; therefore, it doesn’t depend on any particular base year.