Suppose a Worker Signs a Contract Containing a 7 Percent

Multiple Choice

Suppose a worker signs a contract containing a 7 percent nominal wage increase with inflation expected to be 5 percent.Inflation turns out to be 10 percent,but the contract also contains 50 percent COLA protection.The worker's real wage under the contract

A) falls by 3.0 percent.
B) rises by 0.5 percent.
C) rises by 2.0 percent.
D) rises by 1.0 percent.
E) falls by 0.5 percent.