Business, 09.07.2020 03:01 023749

The effects of inflation Suppose Specific Automakers is considering signing a long-term contract with the union representing its workers. Specific Automakers and the union both agree that real wages should increase by 3%. Inflation is expected to be 6%, so they agree on a 9% nominal wage increase.
Now, suppose inflation turns out to be lower than expected, coming in at 5%. This would the union and Specific Automakers because the real wage increase would now be .
Because of uncertainty about future inflation, the union devotes a large quantity of resources to monitoring inflation indicators in order to maximize its financial position.
This illustrates the fact that:
A. Inflation harms lenders and helps borrowers
B. Inflation obscures relative price changes
C. Variable inflation is associated with high transaction costs

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The effects of inflation Suppose Specific Automakers is considering signing a long-term contract wi...

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