Multiple Choice
The bias in the CPI distorts private contracts because
A) a worker that links her salary to the CPI is likely to be worse off than a worker that doesn't link her salary to the CPI.
B) a lender that links the interest payments on the loan to the CPI is likely to be worse off than a lender that does not link the interest payments on the loan to the CPI.
C) a future payment that is linked to the CPI is likely to be raised above the true increase in the price level.
D) a future increase in a payment that is linked to the CPI is likely to be less than the true increase in the price level.
E) the CPI cannot properly account for what goods and services a typical urban consumer buys.
Correct Answer:
Verified
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