The Bias in the CPI Distorts Private Contracts Because

question 25

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.

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Definitions:

Distal Convoluted Tubule

A portion of the nephron in the kidney where salt and water balance are regulated, and certain substances are reabsorbed into the blood.

Glucose

A basic form of sugar that serves as a crucial source of energy in living beings and forms a part of various carbohydrates.

Reabsorbed

The process by which substances are taken back into the bloodstream from the kidneys or other organs during filtration.

Proximal Convoluted Tubule

A tubular section of the nephron in the kidney where a major portion of blood filtration, reabsorption, and secretion occur.