Suppose a Local Union Has a Contract That Calls for the Nominal

Multiple Choice

Suppose a local union has a contract that calls for the nominal wage to increase by 5 percent plus 100 percent of any increase in the CPI.If the CPI increases by 4% and there is a 1% positive bias in the inflation rate,by how much would nominal wages unnecessarily increase?

A) 9 percent
B) 1 percent
C) 5 percent
D) 3 percent
E) 4 percent