A Major Drawback of the Aggregate Price Index Is That

question 49

Multiple Choice

A major drawback of the aggregate price index is that

• A) it does not take into account the fact that some items in the market basket are purchased more frequently than others.
• B) it is difficult to compute.
• C) it is computed by using the values from a single time series or based on a single product.
• D) percentage comparisons cannot be made to the base year.

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Definitions:

Noncash Accounts

Accounts in financial accounting that represent transactions not involving physical cash, such as depreciation or credits.

Noncurrent Assets

Assets that are not expected to be converted into cash, sold, or consumed within one year or the normal operating cycle of the business, typically including property, plant, and equipment.

Treasury Stock

Stocks that the issuing company initially released and then bought back, decreasing the total shares available for trading.

Cash Dividends

Payments made by a company to its shareholders, usually in cash, out of its profits or reserves.