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What is the inflation rate if nominal wages increase by 3 percent and labor productivity increases by 1 percent?
Wiki User
∙ 11y ago
103/101 = 1.0198
So, if there are no other changes, (eg in capital productivity) inflation is 1.98 %.
For small percentage changes, it is usually safe to take 3% - 1% = 2% since the estimation error in these figures is likely to be greater than the rounding error between 1.98 and 2.0
Wiki User
∙ 11y ago
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real income is the change with inflation taken into account, nominal income is purely the change of income therefore if inflation was to be 5% and nominal income increased by 2% there would be a real income decrease of 3%
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Check the inflation rate, and the real GDP. If inflation also is very high, nominal GDP could increase despite there not being any increase in output.
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When the nominal GDP increases it implies that prices have increased. Nominal GDP is current prices and real GDP takes prices changes into account.
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the real interest rate equals nominal interest rate minus inflation rate. In the situation the inflation rate increase and the nominal interest rate remains unchanged, therefore the real interest rate must decrease.
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Nominal InterestA nominal interest rate is the interest rate that does not compensate for inflation. This is used in relation to "effective interest rate" or "real interest rate."" Real Interest Rate = Nominal Interest Rate - Inflation Rate " Improvement suggested by Palash Bagchi.
