Question

When does a cost-of-living allowance (COLA) automatically raise

the wage rate?
a.when GDP increases
b.when the consumer price index increases
c.when taxes increase
d.when the consumer price index

Answer 1

A cost-of-living allowance (COLA) automatically raises the wage rate when the consumer price index increases. COLAs are a form of indexing applied to wages. The consumer price index measures the average change over time in prices paid by urban consumers for a market basket of consumer goods and services.

Step-by-step explanation:

A cost-of-living allowance (COLA) automatically raises the wage rate when the consumer price index increases. COLAs are a form of indexing applied to wages. The consumer price index measures the average change over time in prices paid by urban consumers for a market basket of consumer goods and services. When the consumer price index increases, it indicates that the cost of living has gone up, and therefore wages should be adjusted to keep up with inflation.