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

Question

Quizplus · Accepted Answer

B  C  E  Corporations, workers, and people on Social Security may overcompensate for inflation, leading to higher costs or lower real income. Entrepreneurs borrowing at fixed rates may pay more in real terms if inflation is overestimated.

If Inflation Is Estimated by an Index Like the Consumer