Suppose a Trade Union and a Firm Agree to Increase

Multiple Choice

Suppose a trade union and a firm agree to increase the wage rate by the same percentage as the increase in the Consumer Price Index. If the CPI increases by 5 percent, then the real income of workers will

A) increase by 5 percent as well.
B) remain unchanged, accounting for bias in the calculation of the CPI.
C) decrease by 5 percent, accounting for bias in the calculation of the CPI.
D) increase by more than 5 percent, accounting for bias in the calculation of the CPI.
E) increase by less than 5 percent, accounting for bias in the calculation of the CPI.