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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