A Major Drawback of the Aggregate Price Index Is That

question 111

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:

Coefficient Of Determination

The coefficient of determination, often denoted as R^2, is a statistic used in the context of statistical models whose main purpose is to provide a measure of how well observed outcomes are replicated by the model, based on the proportion of total variation of outcomes explained by the model.

Pearson Coefficient

A measure of the linear correlation between two variables X and Y, giving a value between -1 and 1.

Linear Relationship

A type of association where the change in a variable is consistent with the change in another variable, represented by a straight line on a graph.

Coefficient Of Determination

A measure used in statistical analysis that assesses how well a model explains and predicts future outcomes, typically represented as R-squared.