A Worker Would Be Hurt Least by Inflation When The

question 99

Multiple Choice

A worker would be hurt least by inflation when the:

• A)worker anticipates inflation and increases savings at the bank.
• B)worker is protected by a cost-of-living adjustment clause in an employment contract.
• C)the price level increases but at a decreasing rate.
• D)worker is protected by fixed annual increases in wages and benefits in an employment contract.
• E)government increases the level of social security retirement benefits to correct for the effects of unanticipated inflation.

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Definitions:

Forward Rate

An interest rate agreed today for a loan to be made or a bond to be purchased at a future date.

Zero-Coupon Bond

A type of bond that does not pay interest during its life but is sold at a discount from its face value and pays its full face value at maturity.

Purchase Price

The amount of money paid to acquire a good or service.

Face Value

The nominal value or dollar value printed on a bond, note, or other financial instrument, indicating the amount due at maturity.