Assume the inflation rate falls from 4 percent to 2 percent. This means that
A) real GDP is decreasing.
B) the economy is experiencing deflation.
C) the price level is increasing more slowly.
D) the price level has fallen.

Question

Quizplus · Accepted Answer

The decrease in inflation rate from 4 percent to 2 percent means that the price level is increasing at a slower pace. It does not necessarily mean that real GDP is decreasing or that the economy is experiencing deflation. It also does not mean that the price level has fallen.

Assume the Inflation Rate Falls from 4 Percent to 2