If the consumer price index is 102 in Year One, 108 in Year Two, 106 in Year Three, 105 in Year Four, and 104 in Year Five, which statement correctly describes what the economy is experiencing?(1 point)

Question

Responses

There is inflation from Year One to Year Two, then deflation after that.
There is inflation from Year One to Year Two, then deflation after that.

There is deflation from Year One to Year Two, then deflation after that.
There is deflation from Year One to Year Two, then deflation after that.

There is inflation from Year One to Year Two, then inflation after that.
There is inflation from Year One to Year Two, then inflation after that.

There is deflation from Year One to Year Two, then inflation after that.

Answer 1

To analyze the changes in the Consumer Price Index (CPI) over the years:

• Year One: 102
• Year Two: 108 (increase from Year One)
• Year Three: 106 (decrease from Year Two)
• Year Four: 105 (decrease from Year Three)
• Year Five: 104 (decrease from Year Four)

From Year One to Year Two, the CPI increased from 102 to 108, indicating inflation.

From Year Two to Year Three, the CPI decreased from 108 to 106, indicating deflation.

From Year Three to Year Four, the CPI decreased from 106 to 105, indicating deflation.

From Year Four to Year Five, the CPI decreased from 105 to 104, indicating deflation.

Based on this analysis, the correct statement is:

"There is inflation from Year One to Year Two, then deflation after that."