Sarah currently works for a firm in which he union has negotiated a COLA adjustment that automatically adjusts her income to whatever the annual rate of inflation is for her community. Bob works for a firm that routinely grants its employees a 5% annual income increase. Milt is retired and receives two payments: a pension payment from his former employer that is fixed at $2,000 per month and a government provided retirement payment whose real value is equal to $1,000 per month in the base year. The government-provided retirement payment is indexed to the inflation rate in the community. Suppose the rate of inflation is 8% this year. Describe the effect of this inflation rate on Sarah, Bob, and Milt in terms of their real purchasing power. Who is left in worse shape with this inflation? Does anyone end up better off despite this inflation rate? Explain your answers.