Which of the following results would be the clearest indication that an economy was experiencing deflation?
A)a decrease in the unemployment rate
B)an increase in the PPI
C)a decrease in the CPI
D)a decrease in GDP

Question

Quizplus · Accepted Answer

Deflation is characterized by a general decrease in prices across a variety of goods and services. The Consumer Price Index (CPI) is a common measure of overall price levels in an economy. A decrease in the CPI indicates that prices are falling, which is a clear indication of deflation. Option A is incorrect because a decrease in the unemployment rate would indicate an improving economy with more people employed, which is not consistent with deflation. Option B is incorrect because an increase in the producer price index (PPI) only measures changes in the prices that producers pay for goods and services, and does not necessarily indicate changes in consumer prices or deflation. Option D is incorrect because a decrease in GDP can result from a variety of factors and is not necessarily an indication of deflation.

Which of the Following Results Would Be the Clearest Indication