Cost-of-living adjustments
A)Reduce the price effect of inflation.
B)Allow individuals to maintain their purchasing power during inflation.
C)Cause individuals to shorten their time horizons.
D)Maintain constant real interest rates.

Question

Quizplus · Accepted Answer

Cost-of-living adjustments (COLAs) are increases made to wages or benefits in order to offset the effects of inflation on the cost of living. By maintaining the purchasing power of individuals, COLAs help to prevent a decrease in their standard of living caused by inflation.

Cost-Of-Living Adjustments