ECONOMICS (CBSE/UGC NET)

Detailed explanation-1: -If there is inflation (when goods and services cost more) the CPI will rise over a period of time. If the CPI drops, that means there is deflation, or a steady reduction in the prices of goods and services.

Detailed explanation-2: -Consumer Price Index (CPI) Measures Deflation The CPI is the most commonly referenced index in the U.S. The economy is experiencing deflation when the change in prices in one period is lower than the next, revealing that the CPI index has declined.

Detailed explanation-3: -The CPI is the most widely used measure of inflation and is sometimes viewed as an indicator of the effectiveness of government economic policy.

Detailed explanation-4: -First, subtract the CPI from the beginning date (A) from the later date (B), and divide it by the CPI for the beginning date (A). Then multiply the result by 100 to get the inflation rate percentage.

Detailed explanation-5: -Typically, prices rise over time, but prices can also fall (a situation called deflation). The most well-known indicator of inflation is the Consumer Price Index (CPI), which measures the percentage change in the price of a basket of goods and services consumed by households.