If Workers and Firms Agree on an Increase in Wages

Multiple Choice

If workers and firms agree on an increase in wages based on their expectations of inflation and inflation turns out to be more than they expected,

A) The interest rate will fall
B) Workers will gain at the expense of firms.
C) Neither workers nor firms will gain because the increase in wages is fixed in the labour agreement.
D) Firms will gain at the expense of workers.