Assume That the Base Period for CPI Calculations Is 1980

question 20

Multiple Choice

Assume that the base period for CPI calculations is 1980. In Australia in 2016, around 30% of people accessed the Internet through a broadband connection that did not exist in the 1980s. This potential for bias in the CPI is referred to as ________ bias and results in ________.

• A)outlet; the CPI underestimating the true change in the cost of living
• B)new product; the CPI overestimating the true change in the cost of living
• C)outlet; the CPI overestimating the true change in the cost of living
• D)net product; the CPI underestimating the true change in the cost of living

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Definitions:

Short-Term Assets

Assets that are expected to be converted into cash or used up within one year or within the business's operating cycle if longer than a year.

Quick Ratio

A financial metric that measures a company's ability to meet its short-term obligations with its most liquid assets.

Liquidity

The ease with which an asset can be converted into cash without affecting its market price.

Current Ratio

Current assets divided by current liabilities.