If Inflation Is Estimated by an Index Like the Consumer

question 129

Multiple Choice

If inflation is estimated by an index like the consumer price index (CPI) to be higher than it actually is,who is liable to be hurt by the error?

• A) corporations that adjust worker salaries to keep pace with inflation
• B) workers whose negotiated union wages include an inflation adjustment
• C) people whose Social Security incomes are adjusted for inflation
• D) consumers who pay a fixed percentage of purchases as sales tax
• E) entrepreneurs who borrow from banks at a fixed rate of interest