Ceteris paribus, if workers receive all their productivity increases in the form of higher wages, then wage inflation will remain stable.

Question

Quizplus · Accepted Answer

If workers receive all their productivity increases in the form of higher wages, it means the cost of production for firms will increase. However, since the increased wages are a result of increased productivity, there is no increase in the cost of production for each unit of output. Hence, firms can afford to pay higher wages without raising the prices of their goods and services, which will keep the wage inflation stable.

Ceteris Paribus, If Workers Receive All Their Productivity Increases in the Form