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Chapter 11: Problem 2

Suppose the CPI was 143 in year 1 and 132 in year 2 Did prices rise or fall between year 1 and year \(2 ?\)

Short Answer

Expert verified
Prices fell between year 1 and year 2.

Step by step solution

01

Understanding what CPI represents

The Consumer Price Index (CPI) measures the average change in prices over time that consumers pay for a basket of goods and services. It is a key indicator to measure inflation and deflation.
02

Interpreting the CPI values

In the exercise, we have the CPI of year 1 as 143 and year 2 as 132.
03

Comparison

The task requires us to compare the CPI of two years. Comparing the CPI values, we observe that the CPI in year 2 is less than the CPI in year 1.
04

Final Analysis

Since the CPI in year 2 is less than that in year 1, this indicates that the average prices fell from year 1 to year 2.

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Most popular questions from this chapter

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