Suppose the average level of prices increased from 100 to 110 between 2007 and 2008,and from 110 to 115 between 2008 and 2009.Between 2008 and 2009,there was:
A) deflation.
B) hyperinflation.
C) disinflation.
D) inflation in the real price of everything.

Question

Quizplus · Accepted Answer

Between 2008 and 2009, the rate of increase in prices (inflation) decreased from 10 to 5, which is known as disinflation - a decrease in the rate of inflation. Option A is incorrect because there was a positive increase in prices during both years, so deflation did not occur. Option B is incorrect because hyperinflation is a rapid and uncontrolled increase in prices, which was not the case here. Option D is incorrect because the real price takes into account inflation, so the statement "inflation in the real price of everything" is contradictory.

Suppose the Average Level of Prices Increased from 100 to 110