Suppose an Employer and Its Employees Enter into a Wage

Multiple Choice

Suppose an employer and its employees enter into a wage contract specifying a wage increase of 2%.But suppose that the price level rises by 3% over the course of the contract.In this case,

A) the employees' purchasing power will rise.
B) the employees' purchasing power will fall.
C) the employer will experience a greater fall in purchasing power than would have occurred if the price level had held steady.
D) both employer and employees will benefit from increased purchasing power.
E) both employer and employees will experience a loss of purchasing power.