A true cost-of-living adjustment (COLA)in response to a change in prices would compensate consumers so that they would be able to
A) purchase the same bundle they purchased before prices changed.
B) achieve the same level of utility they did before prices changed.
C) face the same choices they did before prices changed.
D) achieve an increase in utility that is equal to the rate of inflation.

Question

Quizplus · Accepted Answer

A true cost-of-living adjustment (COLA) aims to maintain a consumer's level of utility despite changes in prices, ensuring they can achieve the same level of satisfaction or happiness with their purchases as before the price changes.

A True Cost-Of-Living Adjustment (COLA)in Response to a Change in Prices