"The bias in the CPI distorts private contracts because a future payment that is linked to the CPI will be raised above the true increase in the price level." Is the previous sentence true or false?
What will be an ideal response?
The sentence is correct. The fact that the payments increase by more than the true increase in the price level means that one party to the contract benefits more, the higher the inflation rate.
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In 1995, the General Agreement on Tariffs and Trade (GATT), which was established in 1948, was replaced by the World Trade Organization (WTO). Why did members of the GATT push for the establishment of the WTO?
A) The GATT agreement only covered trade in goods. The WTO was created to cover trade in goods, services, and intellectual property. B) The charter of the GATT had run out and a new organization was needed to promote international trade. C) The creation of the European Union (EU) made the GATT obsolete. The WTO was formed to regulate trade between the EU and other nations. D) By 1995 tariffs had been eliminated. The WTO was created to reduce non-tariff trade barriers.
The smaller the country, the more its spending tends to affect other countries.
Answer the following statement true (T) or false (F)