Homework Answers
Answer :
Inflation in current year =( Price index in current year -Price index in base year )/price index in base year =(110-100)/100=10 %
Inflation on previous year =(price index in previous year -price index in base year) /price index in base year =(120-100)/100=20%
From above two calculation it is clear that rate of inflation is decreased from 20 % to 10% so it is called as disinflation.
Where as deflation occurs when rate of inflation falls below zero I. E. Price index fall below price index of base year.
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