If workers and employers agree to a three-year wage contract under the expectation of 3 percent inflation, and inflation turns out to be 5 percent, then:
A)workers gain and employers gain.
B)workers gain and employers lose.
C)workers lose and employers gain.
D)workers lose and employers lose.

Question

Quizplus · Accepted Answer

Workers lose because their wages just went up 3 percent per year whereas average prices went up 5 percent, so their real incomes fell.

If Workers and Employers Agree to a Three-Year Wage Contract