Which of the Following Is True About the Comparison Between

question 5

Multiple Choice

Which of the following is true about the comparison between the CPI and the PPI?

• A) Both indices are based on the same basket of goods and services.
• B) Sales and excise taxes are included in the PPI, but they are not included in the CPI.
• C) The PPI is more commonly used to adjust wages for changes in the cost of living than the CPI.
• D) Unlike the CPI that uses prices people pay, the PPI uses the prices measured at the wholesale level.

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Definitions:

Capital Budgeting

The process by which investors decide on the long-term investments of a company, such as new machinery, replacement machinery, new products, and research development projects.

Straight-Line Depreciation

A method of allocating the cost of an asset evenly over its useful life, resulting in a constant annual expense.

Cash Flow

The net amount of cash and cash-equivalents being transferred into and out of a business, important for assessing liquidity, flexibility, and overall financial health.

Capital Budgeting

The process of evaluating and selecting long-term investments that are in line with the goal of an organization's wealth maximization.