Economics 2281 · O Level · Inflation and deflation

Inflation and deflation — practice question

The Consumer Prices Index (CPI) in a country decreases from 120 to 110 over one year. What is a likely consequence of this decrease?

  • Aincomes will fall in real terms
  • Bsavings will fall in real terms
  • Cthe rate of interest will rise
  • Dthe real value of debt will rise

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