In 2001, in Calculation of the Implicit Price Index, Statistics

question 156

Multiple Choice

In 2001, in calculation of the implicit price index, Statistics Canada switched from fixed based price index method to a chain-weighted index.The main reason for this was:

• A)to avoid complex calculation of the fixed based price index.
• B)to better represent the weight of each category especially the information technology sector.
• C)to avoid underestimation of the GDP growth, due to the rapid growth in the information technology sector.
• D)to be able to use the relatively constant weights for the items in the GDP year after year.

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Definitions:

Sunk Costs

Costs that have already been incurred and cannot be recovered, and thus should not affect future investment or business decisions.

Variable Costs

Expenses that directly fluctuate in relation to the amount of goods produced or the volume of sales.

Total Fixed Cost

The sum of all costs that do not change with the level of output or sales in the short term, such as rent and salaries.

Activity Bases

Metrics used to allocate costs based on various activities or drivers that cause costs to be incurred.