If Workers and Firms Agree on an Increase in Wages

question 5

Multiple Choice

If workers and firms agree on an increase in wages based on their expectations of inflation and inflation turns out to be more than they expected,

• A)the interest rate will fall.
• B)workers will gain at the expense of firms.
• C)neither workers nor firms will gain because the increase in wages is fixed in the labour agreement.
• D)firms will gain at the expense of workers.

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Definitions:

Unadjusted Cost of Goods Sold

Unadjusted Cost of Goods Sold (COGS) is the initial calculation of all costs directly associated with the production of goods before any adjustments for inventory changes or other factors.

Journal Entry

A record in the accounting journal that represents a business transaction and its effect on the accounts.

Manufacturing Overhead

All indirect costs associated with the production process, from maintenance expenses of the production facility to the supplies needed for operation.

Work in Process

Goods that are midway through the manufacturing process but are not fully finished.