Given the rule of thumb for the relationship between nominal

Given the rule of thumb for the relationship between nominal wage, productivity and inflation increases, if productivity goes up 2% and wages increase by 3%, we would expect inflation to be:

Question 32

0 percent.

1 percent.

1.5 percent.

3 percent.

Solution

expected inflation= wage increase- productivity increase= 3-2= 1%

b)1 percent.