The Cost of Living Adjustments (COLA)are Featured in Many Labour

question 54

Multiple Choice

The cost of living adjustments (COLA) are featured in many labour contracts and pension plans. They:

• A)mandate adjusting income upwards by half the increase in prices over the respective period.
• B)naturally lead to both income and substitution effects being present.
• C)lead to a substitution effect and no income effect.
• D)lead to an increase in compensation via a substitution effect.