If 51% of all goods in the consumer price index (CPI)became more expensive and 49% became cheaper:
A) inflation would certainly occur.
B) deflation would most likely occur.
C) inflation or deflation could occur, depending on the weight of these goods in the basket of goods and the actual percent changes.
D) deflation would certainly occur if the price of housing was one of the goods that fell.
E) inflation would occur if the goods whose prices increased did so by the same percentage as the goods whose prices decreased.

Question

Quizplus · Accepted Answer

The outcome of inflation or deflation is dependent on the weight of the goods in the basket of goods and the actual percentage changes. If the goods that became more expensive have a higher weight in the CPI, then inflation would occur. On the other hand, if the goods that became cheaper have a greater weight, then deflation would occur. Therefore, the answer cannot be A, B, D, or E as they make assumptions that cannot be guaranteed given the information provided.

If 51% of All Goods in the Consumer Price Index