If the CPI falls from 142 to 140 between two consecutive years,this implies that prices fell by 2 per cent between those two years.

Question

Quizplus · Accepted Answer

The CPI measures the average price of a basket of goods and services in a given year relative to a base year. Therefore, a decrease in the CPI between two consecutive years indicates that the prices of goods and services in general have decreased. However, it is not necessarily a 2 percent decrease, as the CPI value is not directly proportional to the percentage change in prices. The actual percentage change in prices can only be determined by calculating the inflation rate, which takes into account the weights and prices of individual goods and services in the basket.

If the CPI Falls from 142 to 140 Between Two