The existence of cost of living adjustments in many wage contracts
A)assures that these wages fully adjust to aggregate nominal disturbances.
B)results in these wages being completely rigid.
C)does not result in these wages fully adjusting to aggregate nominal disturbances.
D)is being phased out under recent federal legislation.

Question

Quizplus · Accepted Answer

Cost of living adjustments in wage contracts do not fully adjust to aggregate nominal disturbances, as they only take into account changes in the cost of living and not necessarily changes in aggregate demand or inflation.

The Existence of Cost of Living Adjustments in Many Wage