A Price Relative Was Computed for Houses

question 35

Multiple Choice

A price relative was computed for houses. The base period is 2005. The price relative in 2010 was 130. The interpretation of the price relative is that

• A)there has been a 130% increase in the price of houses from 2005 to 2010.
• B)there has been a 30% increase in the price of houses from 2005 to 2010.
• C)the price of houses in 2010 was $130 higher than the price in 2005.
• D)It is impossible to interpret the index.

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Definitions:

Uncollectible Accounts

Accounts receivable that are deemed to be uncollectible, leading to their removal from the accounts through a write-off process.

Write Off

The accounting action of declaring that an asset is partially or completely worthless.

Factored Accounts Receivable

The process of selling accounts receivable to a third party at a discount to quickly generate cash and reduce risk of non-payment.