Given the basic rule of thumb for the relationship among inflation, productivity and nominal wage increases, if wages rise by 2 percent and productivity increases 1 percent, one would predict inflation to be:
A)0 percent.
B)1 percent.
C)1.5 percent.
D)3 percent.

Question

Quizplus · Accepted Answer

The basic rule of thumb for the relationship among inflation, productivity, and nominal wage increases suggests that inflation equals wage increases minus productivity increases. Therefore, if wages rise by 2 percent and productivity increases by 1 percent, inflation would be predicted to be 1 percent (2% - 1% = 1%).

Given the Basic Rule of Thumb for the Relationship Among