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:

Incentive Approach

A motivational model that suggests behavior is directed towards rewards or away from punishments.

Motivation

The psychological processes that arouse and direct goal-directed behavior.

Drive-Reduction Theory

A motivational theory proposing that humans are motivated to reduce internal states of tension and psychological discomfort, seeking to restore homeostasis.

Drives

Psychological triggers that stimulate an organism to action toward a specific goal or fulfillment of a need.