Answer: Worsen; benefits
Step-by-step explanation:
Specific Automakers is signing a long term contract with the union who are the representative of workers.
Real wages should increase by = 2%
Expected inflation = 5%
Nominal wage increase = 7%
Actual inflation = 6%
Actual inflation is greater than expected inflation, so this would worsen the union and it is beneficial for the automakers because now real wage increase is only:
= Nominal wage - Actual inflation rate
= 7% - 6%
= 1%
This is an example of re-distributive cost of inflation.