i. To deflate sales, the actual sales are multiplied by the wholesale price index and the result multiplied by 100. ii. The CPI serves only one major function: as an economic indicator of the rate of inflation.
iii. To construct a special-purpose index designed to measure general business activity, the weights are based on the judgments of the statistician and assigned to each series.
A) (i), (ii), and (iii) are all correct statements.
B) (i) and (ii) are correct statements but not (iii).
C) (i) and (iii) are correct statements but not (ii).
D) (iii) is a correct statement, but not (i) or (ii).
E) (i), (ii), and (iii) are all false statements

Question

Quizplus · Accepted Answer

Statement (iii) is correct as special-purpose indices often use subjective weights based on expert judgment. Statement (i) is incorrect because deflating sales typically involves dividing by a price index, not multiplying. Statement (ii) is incorrect because the CPI has multiple functions, including adjusting income payments and serving as a deflator for other economic series.

I to Deflate Sales, the Actual Sales Are Multiplied by the Wholesale