Answer to Question 3:
The fact that Italy has a higher inflation rate than Canada
implies that all prices are rising faster in Italy.
True or False?
The answer is false. A higher inflation rate in Italy means that
the average level of prices is rising faster in that country.
It does not mean that all prices are rising faster. Some prices
could even be falling. But the effect of these falling prices on the
average level of prices has to be less than the effect on the
average price level of the prices that are rising faster.
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