Suppose Workers Negotiate for a 5 Percent Nominal Wage Increase

Multiple Choice

Suppose workers negotiate for a 5 percent nominal wage increase and expect a 1 percent inflation rate. If the actual inflation rate is 6 percent, then workers

A) and firms are both better off.
B) are better off and firms are worse off.
C) are worse off and firms are better off.
D) and firms are both worse off.