If you negotiated a salary based on an anticipated inflation rate of 4 percent, and the actual inflation rate turned out to be 6 percent
A) the purchasing power of your real wages would be more than you anticipated.
B) your employer would have gained at your expense.
C) your real wage will increase, but your nominal wage will decrease.
D) the purchasing power of your wages will not change, since purchasing power is based on your nominal wage.

Question

Quizplus · Accepted Answer

If the negotiated salary was based on an anticipated inflation rate of 4 percent, the employer would have set the salary accordingly. However, if the actual inflation rate turned out to be 6 percent, the cost of living would have gone up more than expected, and the purchasing power of the employee's salary would decrease. Therefore, the employer gains at the expense of the employee.

If You Negotiated a Salary Based on an Anticipated Inflation