Final answer:
To calculate the simplified inflation rate, we consider the increase in wages of 2.50% and the decrease in labor productivity of -1.3%. If these were the only factors, the approximate inflation rate would be 3.8%, derived from adding the wage increase to the negative change in productivity.
Step-by-step explanation:
The question is asking to calculate the inflation rate in Ruritania given the percentage increase in wages and the change in labor productivity. The price index and the productivity index are two different metrics, but typically, if wages increase by a certain percentage without a corresponding increase in productivity, it can lead to inflation. However, since productivity decreased by 1.3%, this might partially offset the wage increase effect on inflation.
Assuming the relationship between wage increase, productivity change, and inflation is linear and the entirety of wage increase is passed into prices, the approximate inflation rate can be calculated as the difference between the wage increase and the productivity change.
Here, the inflation rate would be 2.50% (wage increase) - (-1.3% productivity change) which equals to 3.8%. This result assumes that there are no other factors influencing prices and it is a simplified calculation.
In a more comprehensive economic analysis, other factors such as supply and demand changes, monetary policy, and external economic conditions would also affect the inflation rate.