Consider a nation in which the price index was 150 last year and this year it is 130.Which statement is correct?
A) Inflation was 20% this year.
B) Deflation was 20% this year.
C) Housing prices must have fallen.
D) Inflation was 13.33% this year.
E) Deflation was 13.33% this year.

Question

Quizplus · Accepted Answer

The correct statement is that deflation was 13.33% this year. This is calculated as (150-130)/150 x 100%. Housing prices may or may not have fallen - this cannot be determined from the given information. Option A and D are incorrect as they assume inflation occurred when in fact there was deflation. Option B is incorrect as deflation occurred rather than inflation.

Consider a Nation in Which the Price Index Was 150