If employers and employees are negotiating a wage rise and the expected rate of inflation is 7%, which of the following would you expect?
A) We need more information about the expectations of both employers and employees.
B) The increase in wage will be about 7%, as employees will negotiate a wage rise above that and employers a wage rate below that.
C) The increase in wage will be above 7%, as employees have more market power.
D) The increase in wage will be below 7% as employers always have more power in wage negotiations.
Correct Answer:
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