If workers and employers agree to a three-year wage contract under the expectation of 5 percent inflation, and inflation turns out to be 3 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

If workers and employers agree to a three-year wage contract under the expectation of 5 percent inflation, and inflation turns out to be 3 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.

Quizplus · Accepted Answer

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

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