What Happens to Workers Who Contract for Cost of Living

question 105

Multiple Choice

What happens to workers who contract for cost of living allowances of 10% a year when the inflation rate falls to 4%?

• A) They lose purchasing power.
• B) They are paying an inflation tax.
• C) They become more costly to employ and may lose their jobs.
• D) They must be suffering from money illusion.

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Definitions:

Income Increases

Refers to a rise in the amount of money received by a person or entity, typically from work, business, or investments.

Benefits-Received Principle

The benefits-received principle is a taxation theory suggesting that individuals should be taxed based on the extent to which they benefit from public goods and services.

Excise Tax

A type of indirect tax imposed on specific goods, such as tobacco and alcohol, often with the aim of reducing their consumption or generating revenue.

Public Golf Courses

Golf facilities that are owned by a government entity and are open to the public, typically requiring payment of a fee for use.