In a recovery phase, a falling rate of inflation means that the price level is
A) falling.
B) falling at an increasing rate.
C) rising by smaller and smaller percentages.
D) falling at a constant rate.

Question

Quizplus · Accepted Answer

A falling rate of inflation means that prices are still increasing, but at a slower rate. This is consistent with a recovery phase, as the economy is growing and demand is increasing at a slower and more sustainable pace. Therefore, the price level is rising, but by smaller and smaller percentages, so option C is the best choice.

In a Recovery Phase, a Falling Rate of Inflation Means