To your first paragraph question, the answer is essentially 'no' (but it's complicated). From a theoretical standpoint, productivity is a volumetric measure (O

To your first paragraph question, the answer is essentially 'no' (but it's complicated). From a theoretical standpoint, productivity is a volumetric measure (Outputs / Inputs). From a more practical standpoint, even if output is measured in dollar denominated terms, the methodology used to measure total/multi factor productivity (TFP/MFP) minimise the effects of inflation on the calculated residual, primarily by: - also measuring inputs in these terms (e.g. wages paid to labour, rents paid to capital) - adjusting prices with reference to a selected base-year so that movements in MFP/TFP are comparable across years And empirically, it has been historically observed that productivity and inflation are actaully inversely correlated (i.e. periods of high inflation have show low productivity and vice-versa). This is what you'd generally expect if MFP/TFP estimates are largely unaffected (directly) by inflation. The inverse correlation is likely due to the efficiency sapping effects of high inflatation (which imposes frictional costs and mispricing inefficiencies) at the 'whole of economy' level. And at the industry level, it's likely a mix of the latter and, in cases of exogenous output price increases (e.g. booming commidity prices), due to firms throwing more inputs at producing more marginal outputs (which is now a profitable thing to do due to higher sale prices). Here's a paper on this issue: https://www.rba.gov.au/publications/rdp/2003/pdf/rdp2003-10.pdf https://www.rba.gov.au/publications/rdp/2003/pdf/rdp2003-10....