Yep, read it. But it's pretty simple math. Productivity = GDP / Hours. That means that GDP / Productivity = Hours. You're saying that inflation is an increase in the ratio of GDP to Productivity. So under that hypothesis, inflation is equivalent to an increase in the number of hours. (I think I said decrease before). That is clearly not the case. Microeconomic analysis doesn't work on macroeconomic issues because macroeconomics includes complex feedback.
Originally Posted by Kushinator
For example, your example is based on the false assumption that there are no other producers and there is inelastic demand. If a company has a fall in productivity, then they lose profit as they'll have to hire more workers to maintain the same supply. If all of the suppliers suffer a similar loss in productivity, then the Nash Equilibrium will shift, and supply, demand, and profit will reach a new equilibrium.
According to wikipedia:
Currently, the quantity theory of money is widely accepted as an accurate model of inflation in the long run. Consequently, there is now broad agreement among economists that in the long run, the inflation rate is essentially dependent on the growth rate of money supply relative to the growth of the economy. However, in the short and medium term inflation may be affected by supply and demand pressures in the economy, and influenced by the relative elasticity of wages, prices and interest rates.