Escalator clauses become important in times of rising inflation because they protect the real value of wages.

Question

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Escalator clauses are provisions in contracts that adjust payments based on changes in a specific economic indicator, such as inflation. In times of rising inflation, the cost of living increases, and wages may lose their real value. Therefore, escalator clauses become important to ensure that wages keep up with the cost of living adjustments and protect the real value of salaries.

Escalator Clauses Become Important in Times of Rising Inflation Because