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Economics · May / June 2021 · Paper 11 · Question 19

2281Inflation

A country's inflation rate, measured by the Consumer Prices Index (CPI), was 3% in year 1. Three years later it was 0.8%. What can be concluded from this information?

  1. APrices are falling.
  2. BThe rate of price increases is falling.
  3. CThe real rate of interest is negative.
  4. DThere is increased purchasing power for those on fixed incomes.

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Correct answer: B. The rate of price increases is falling.

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