Because the CPI Overstates Inflation

question 101

Multiple Choice

Because the CPI overstates inflation,

• A)workers do not receive adequate compensation for price changes.
• B)as time passes, government payments are increasingly lower than intended.
• C)most contracts use the GDP deflator to measure inflation.
• D)as time passes, government outlays are increased by more than necessary to compensate for inflation.
• E)when wages are linked to the CPI, workers' wages become too low as time passes.

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Definitions:

Rate of Return on Investment

A measure of the profitability and efficiency of an investment, calculated by dividing the investment's gain by its cost.

Owners' Equity

refers to the owner's interest in the assets of a business after all liabilities have been deducted.

Net Income

The profit remaining after all expenses, taxes, and costs have been subtracted from total revenue.

Working Capital Ratio

A financial metric used to determine a company's ability to pay off its current liabilities with its current assets.