If the Average Price Level in 2002 Was 1

question 74

Multiple Choice

If the average price level in 2002 was 1.25 relative to the base year in 1992, then:

• A)a dollar in 2002 bought just 80 percent of the goods and services that a dollar bought in 1992.
• B)average prices were 80 percent higher in 2002 than in 1992.
• C)a dollar in 2002 bought 25 percent more goods and services than a dollar bought in 1992.
• D)average prices were 125 percent higher in 2000 than in 1992.
• E)purchasing power rose 25 percent between 1992 and 2002.

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Definitions:

Information Content Effect

Refers to how a company's stock price reacts to the announcement of financial information, indicating the market's response based on the news' perceived value.

Dividend Payout

Dividend Payout refers to the proportion of earnings that a company distributes to its shareholders as dividends.

NPV Projects

Projects evaluated using Net Present Value, a method to calculate the profitability by comparing the present value of cash inflows with the present value of cash outflows over time.

Low Dividend Payouts

A company strategy of distributing relatively small portions of earnings to shareholders as dividends.