4. The CPI in year 1 = 120, the CPI in Year 2 = 144. Calculate...

4. The CPI in year 1 = 120, the CPI in Year 2 = 144. Calculate the amount of inflation or deflation. Why is this important?

Solutions

Expert Solution

Inflation in simple terms is a general rise of price level of goods and services in economy over a given period of time

Deflation is just opposite of inflation

When there is negative inflation then deflation is there

It is very important tool for telling that where the economy is going, how to the base year price level of goods and services have been risenso that for the decision can be taken

Also form in economy the primary fiscal goal is to control it so that burden of debt can be reduced

If an economy suffers from excessive inflation then the situation is called hyper inflation

Hyperinflation situation can be best seen in the Venezuela where due to inflation, the currency loses its purchasing power as compared to other foreign currencies

Rahul Sunny answered 1 month ago

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