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The table below shows the annual changes in CPI from Year 1 to Year 4. During which year did this economy experience deflation?



Percentage change in the CPI from the year before

Year 1

+ 2%

Year 2

+ 3%

Year 3

+ 1%

Year 4

- 4%



Group of answer choices

Year 1

Year 2

Year 3

Year 4

1 answer

Deflation occurs when there is a decrease in the general price level of goods and services, which is indicated by a negative change in the Consumer Price Index (CPI).

In the table provided:

  • Year 1: +2%
  • Year 2: +3%
  • Year 3: +1%
  • Year 4: -4%

The only year with a negative percentage change in the CPI is Year 4, where the change is -4%.

Therefore, the economy experienced deflation in Year 4.