If the Price Index Is P₁ in One Year and P₂

question 1

Multiple Choice

If the price index is P₁ in one year and P₂ in the next year,the inflation rate from one year to the next is calculated as

• A)(P₂ - P₁)× 100.
• B)(P_2/P₁)× 100.
• C)(P_1/P₂)× 100.
• D)[(P₂ - P₁)/P₁] × 100.
• E)[(P₁ - P₂)/P₂] × 100.

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Definitions:

Commercial Paper

An unsecured, short-term debt instrument issued by corporations to finance their immediate cash flow needs.

Spontaneous Financing

Refers to funding that occurs naturally as a firm's operations grow, such as trade credit that increases with sales.

Accrual Liabilities

Obligations that a company has incurred, for which invoices have not yet been received or payment has not been made.

Accounts Payable

Money owed by a business to its suppliers or creditors for goods and services received but not yet paid for.