Consider a nation in which the price index was 150 last year and this year it is 130.Which statement is correct?
A) Inflation was 20 percent this year.
B) Deflation was 20 percent this year.
C) Housing prices must have fallen.
D) Inflation was 13.33 percent this year.
E) Deflation was 13.33 percent this year.

Question

Quizplus · Accepted Answer

Deflation = ((New Price Index - Old Price Index)/Old Price Index) x 100
= ((130-150)/150) x 100
= -20/150 x 100
= -13.33%
Therefore, the correct statement is that deflation was 13.33 percent this year.

Consider a Nation in Which the Price Index Was 150