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Steve Walker, CFA, is attending an economics lecture, during which the lecturer makes the following two statements about consumer price inflation:
Statement 1: High-definition televisions are considerably more expensive than traditional models. This means consumers are spending more money per television unit, which represents a form of inflation.
Statement 2: Employment contracts with automatic increases based on the Consumer Price Index fail to increase wages in line with the cost of living because of biases in the price index.
Should Walker agree or disagree with these statements?
A.
B.
C.
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