Which of the Following Is True of a Price Index

question 38

Multiple Choice

Which of the following is true of a price index that uses a fixed market basket?

• A) It accurately predicts the impact of rising prices when purchases are made at superstores.
• B) It overstates the importance of items that fall in price.
• C) It takes into account changes in quality while computing price changes.
• D) It excludes new goods and services.

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Definitions:

Contingent Payment

A payment that is not guaranteed but depends on the occurrence of a certain event or condition in the future.

Cash Flows

The complete sum of funds moving into and out of an enterprise, predominantly affecting its ability to cover short-term obligations.

Time Value

The principle that money available at the present time is worth more than the same amount in the future due to its potential earning capacity.