If workers and firms agree on an increase in wages based on their expectations of inflation and inflation turns out to be more than they expected ?

A. none of these answers
B. Workers will gain at the expense of firms
C. neither workers nor firms will gain because the increase in wages in fixed in the labor agreement
D. firms will gain at the expense of workers.

Correct Answer: firms will gain at the expense of workers. ✔

Last Updated: June 11, 2019