Suppose That Canada's Official Consumer Price Index (CPI)inflation Rate Contains

question 78

Multiple Choice

Suppose that Canada's official consumer price index (CPI) inflation rate contains a measurement error in that it overstates the true cost of living increases of Canadians by 1.5% per year.This would mean that,during a year in which the CPI inflation rate is 1.5%,all senior citizens whose federal pensions are indexed to the CPI inflation rate would experience a ________ in their nominal incomes and a _________ in their real incomes.

• A) 3.0% increase;1.5% decrease
• B) 1.5% increase;1.5% decrease
• C) 1.5% increase;0% increase
• D) 1.5% increase;1.5% increase
• E) 3.0% increase;3.0% increase

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Definitions:

Thrust Faulting

A geological process where one rock layer is pushed up over another, often leading to mountain building.

Overriding Plate

The tectonic plate that sits above another plate at a convergent boundary, often responsible for mountain building and volcanic activity.

Ocean-Continent Convergent Boundary

A plate-tectonic boundary where an oceanic plate converges with a continental plate, generally expressed by subduction of the oceanic plate beneath the continent.

Flexing

The act of bending or tensing a material or muscle, often referring to the way earth's crust might bend under certain geological forces.