A Price Index Is

question 175

Multiple Choice

A price index is

• A)a comparison of the current price of a market basket to a fixed point of reference.
• B)a comparison of real GDP in one period relative to another.
• C)the cost of a market basket of goods and services in a base period divided by the cost of the same market basket in another period.
• D)a ratio of real GDP to nominal GDP.

---

Definitions:

Recorded When Incurred

An accounting principle that stipulates expenses should be recognized in the financial statements in the period they are incurred, regardless of when the cash payments are made.

Adjusting Entries

Journal entries made at the end of an accounting period to update account balances before financial statements are prepared.

Account Balances

The total amount of money in a financial account, calculated by adding all credits and subtracting all debits.

Expense Recognition Principle

An accounting principle that expenses should be recognized in the period in which they are incurred to produce revenues, aligning expenses with corresponding revenues.