ECONOMICS
BUSINESS CYCLES
|
Question
[CLICK ON ANY CHOICE TO KNOW THE RIGHT ANSWER]
|
|
|
There was deflation in the economy
|
|
|
There was disinflation in the economy
|
|
|
Unemployment is increasing in the economy
|
|
|
Unemployment is deceasing in the economy
|
|
|
Consumers paid 10% higher prices since the base year
|
Detailed explanation-1: -Answer and Explanation: If the Producer’s Price Index changes from 100 to 90, economists will know that D. inflation is decreasing in the economy.
Detailed explanation-2: -The CPI is one of the most commonly used tools to measure inflation and deflation. Inflation is an important indicator of an economy’s health. Governments and central banks use the CPI and other indices to make economic decisions. Key among these is whether to raise or lower interest rates.
Detailed explanation-3: -The precise inflation rate as the price index moves from 107 to 110 is calculated as (110 – 107) / 107 = 0.028 = 2.8%.
Detailed explanation-4: -When there is an upward change in the CPI, this means there has been an increase in the average change in prices over time. This eventually leads to adjustments in the cost of living and income (presumably so that income is adjusted to meet a higher cost of living).