What happens to workers who contract for cost of living allowances of 10 percent a year when the inflation rate falls to 4 percent?
A) They lose purchasing power.
B) They are paying an inflation tax.
C) They become more costly to employ and may lose their jobs.
D) Each of these answers is correct.

Question

Quizplus · Accepted Answer

When the inflation rate falls to 4 percent, workers with a 10 percent cost of living allowance become more costly to employ, as their wages increase faster than the inflation rate, potentially leading to job loss.

What Happens to Workers Who Contract for Cost of Living