Question

A term for when inflation is decreasing (for example if the rate of inflation falls from 5% to 2% per year) is ___.

(A) deflation
(B) disinflation
(C) deadweight loss
(D) shortage
(E) underemployment

Answer 1

The term for a decreasing inflation rate is (B) 'disinflation,' explaining a situation where the inflation rate slows down but prices on average are still increasing, just at a slower rate.

Step-by-step explanation:

The term that describes when the inflation rate decreases, such as falling from 5% to 2% per year, is disinflation. Disinflation is distinct from deflation, which refers to a decrease in the general price level, leading to a negative inflation rate.

Disinflation indicates a slowdown in the rate of price increases and can be viewed as the economy cooling down from higher inflation rates to more moderate levels. It should not be confused with deadweight loss, shortage, or underemployment, which are different economic concepts.