A clause in a contract that automatically increases wages to account for increases in the price level is
A) the GDP deflation.
B) the PCE index.
C) a COLA.
D) the real rate of interest.

Question

Quizplus · Accepted Answer

A clause in a contract that automatically increases wages to account for increases in the price level is known as Cost of Living Adjustment (COLA). This protects employees from inflation by tying their wages to the price level, which means that as prices rise, so do their wages. The GDP deflation is a measure of the change in the level of goods and services produced by a country's economy. The PCE index refers to Personal Consumption Expenditures, which measures the price changes of goods and services purchased by individuals. The real rate of interest reflects the nominal interest rate adjusted for inflation.

A Clause in a Contract That Automatically Increases Wages to Account