Suppose that the inflation rate was 4 percent in 2002 and 3 percent in 2003.This would mean that
A) the price level fell from 2002 to 2003
B) the price level fell at a faster rate in 2003 than in 2002
C) the price level rose at a faster rate in 2003 than in 2002
D) the price level rose at a slower rate in 2003 than in 2002
E) all prices in the economy rose at a rate of 3 percent in 2003

Question

Quizplus · Accepted Answer

The inflation rate in 2003 (3%) was lower than in 2002 (4%), which means that the price level rose at a slower rate in 2003 than in 2002. So, option D is the correct answer. Options A, B, and E are incorrect because they suggest that the price level fell, fell at a faster rate, or rose at a constant rate, respectively, which does not correspond to the given information.

Suppose That the Inflation Rate Was 4 Percent in 2002