Question

Nancy's union has negotiated a three-year wage contract that provides for a 2.4% increase indexed to inflation. The rates of inflation are forecast to be 1.62%, 1.93% and 2.21% respectively. How will Nancy's wage increase be expressed in the new contract?COLA plus 1.6%COLA plus 1.9%COLA plus 2.4%COLA plus 2.2%

Answer 1

Nancy's union has negotiated a three-year wage contract that provides for a 2.4% increase indexed to inflation. The rates of inflation are forecast to be 1.62%, 1.93% and 2.21% respectively Nancy's wage increase be expressed in the new contract as -COLA plus 2.4%

Explanation:

From the question it is clear that the rate of inflation is  forecasted to be either 1.62%,1.93% or 2.21% in the near future

But As per the  wage contract of the Nancy's union the increase in inflation is assumed to be 2.4%

So,the Nancy's wage increase in the new contract will be expressed as -COLA plus 2.4%

(The term COLA refers to the cost of living adjustment)

Wage increase =cost of living adjustment(COLA)+increased inflation