If wages increase 4% faster than productivity, inflation will be 3% higher because wages account for 75% of the total costs for a firm.

Question

Quizplus · Accepted Answer

Inflation is influenced by a variety of factors, not just the relationship between wage increases and productivity. The statement oversimplifies the complex dynamics of inflation, which also depends on factors like supply and demand, monetary policy, and global economic conditions.

If Wages Increase 4% Faster Than Productivity, Inflation Will Be