If the consumer price index falls from 120 to 116 in a particular year,the economy has experienced:
A)inflation of 4 percent
B)inflation of 3.33 percent
C)deflation of 3.33 percent
D)deflation of 4 percent
E)low unemployment

Question

Quizplus · Accepted Answer

Deflation is a decrease in the general price level of goods and services in an economy. A fall in the consumer price index from 120 to 116 indicates a decrease in the overall price level, which implies deflation. The percentage decrease is calculated as (120-116)/120 x 100, which is 3.33%. Therefore, the correct option is C, deflation of 3.33%.

If the Consumer Price Index Falls from 120 to 116