Question

The CPI changes from 100 to 90. This means that: the base year index has been changed to 90. there is deflation. consumers now purchased 10% fewer goods due to inflation. 90% of all prices have fallen

Answer 1

A change in the CPI from 100 to 90 indicates deflation in the economy, meaning there is a general decrease in prices of goods and services by 10% from the base year.

Step-by-step explanation:

When the Consumer Price Index (CPI) changes from 100 to 90, it indicates that there is a general decline in the prices of goods and services in the economy, which is known as deflation. This does not mean that the base year index has been changed, nor does it necessarily imply that consumers purchased fewer goods due to inflation. Likewise, it doesn't mean that 90% of all prices have fallen; the CPI is an average of a basket of goods and services representing typical consumer purchases. Therefore, a change in the CPI index from 100 to 90 would indicate that overall prices have decreased by 10% from the base year.