Suppose the price levels in an economy in four successive years are 100, 120, 133, and 140, respectively. Which of the following is true in such a case?
A) The economy is experiencing hyperinflation.
B) The economy is experiencing deflation.
C) The economy is experiencing inflation.
D) The economy is experiencing appreciation.
E) The economy is experiencing disinflation.

Question

Quizplus · Accepted Answer

Inflation is occurring as prices are increasing over time. However, it is not hyperinflation as the percentage increase in prices is gradually declining each year. It is also not deflation as prices are not decreasing. It is not appreciation as that term refers to an increase in the value of a currency relative to other currencies. Disinflation refers to a slowdown in the rate of inflation, but as prices are still increasing in this case, disinflation is not the appropriate term.

Suppose the Price Levels in an Economy in Four Successive