Which of the Following Is NOT True of Price Indexes

question 76

Multiple Choice

Which of the following is NOT true of price indexes?

• A) They show changes in the general level of prices.
• B) They are used to estimate the rate of inflation or deflation.
• C) They are used to convert nominal values to real values, so comparisons can be made across time.
• D) They are used to compute the growth rate of real output in the economy.

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Definitions:

Predetermined Overhead Rate

The estimated cost of manufacturing overhead for a specific reporting period, divided by an allocation base, like direct labor hours.

Capacity

The maximum level of output that a company can sustain to produce in a given period under normal conditions.

Predetermined Overhead Rate

A predetermined rate for distributing overhead expenses to products or services, based on anticipated costs and levels of activity.

Machine-Hours

A measure of production output or activity level based on the number of hours machines are operated.