inflation rate and productivity (1 Viewer)

[elliottjohnson]

hey,

can someone please explain to me the relationship between productivity and the rate of inflation. Text doesn't cover in enough detail.

thanks!!

 

[twistedrebel]

High Productivity leads to replacement of capital to labour. With more labour being employed, the inflation rate rises due to a decrease in unemployment rate

 

[Need_Help]

if wage increases rise faster than the rate of productivity, this will increase the cost per unit of output, thus increasing inflation through 'cost-push' inflation as firms pass down the increased production costs to the consumer to maintain their profit margins