If an employer uses an escalator clause to determine an employee's raise each year, in an inflationary environment, the employer is more likely than the employee to want to use the personal consumption expenditures price index in this clause.

Question

Quizplus · Accepted Answer

The personal consumption expenditures price index is considered a better measure of inflation than other measures, such as the consumer price index, as it takes into account changes in consumer behavior and can better capture changes in prices for services as well as goods. Therefore, in an inflationary environment, the employer would want to use a more accurate measure of inflation to ensure that the employee's raise keeps up with the rising cost of living.

If an Employer Uses an Escalator Clause to Determine an Employee's