Problems with a Fixed-Weight Price Index Include All of the Following

question 93

Multiple Choice

Problems with a fixed-weight price index include all of the following except one.Which is the exception?

• A)the index utilizes prices from the base year only
• B)the index does not account for relative price changes over time
• C)price distortions only decrease when there is a long time period covered
• D)base year does not include new products which came into existence later
• E)the price index does not take into consideration quality changes

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Definitions:

Compound Interest

The interest computed on the principal and any interest earned that has not been paid or withdrawn.

Principal

The original sum of money borrowed in a loan, or the amount of the loan outstanding at any given time, excluding any interest.

Compound Interest

Interest calculated on the initial principal and also on the accumulated interest of previous periods of a deposit or loan.

Principal

The original sum of money borrowed in a loan, or the initial amount of investment, excluding any interest or dividends.