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If inflation is 3 percent, then it is most likely that: a) productivity growth is 3...

If inflation is 3 percent, then it is most likely that:

a) productivity growth is 3 percent.

b) productivity is growing 3 percent faster than nominal wages.

c) nominal wages are growing 3 percent faster than productivity.

d) nominal wages are growing at 3 percent.

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Answer #1

Option C) is correct

In the presence of inflation, the increase in real wage / productivity is less than the increase in the nominal wages because nominal increase - real increase = rate of inflation. This implies that when there is an inflation, nominal wages are growing 3 percent faster than productivity.

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