If a Private Wage Contract Is Agreed Upon with a Cost

question 38

Multiple Choice

If a private wage contract is agreed upon with a cost of living adjustment such that wage rises are equal to increases in the CPI,

• A)workers exactly keep pace with changes in the cost of living.
• B)the employer benefits because wages will rise less than the change in actual prices.
• C)workers benefit because the CPI increases more rapidly than the cost of living.
• D)the CPI bias means that workers benefit if the price level rises and the employer benefits if the price level falls.
• E)the CPI bias means that workers benefit if the price level falls and the employer benefits if the price level rises.

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