Table 5-5 Gives Data on the Consumer Price Index for a Particular

question 136

Multiple Choice

Table 5-5 gives data on the consumer price index for a particular city. The base year is 2002. Use the table to answer questions .
Table 5-5

-Refer to Table 5-5. Which of the following statements is true?

• A) The rate of inflation was highest in 2005 as compared to 2004 prices.
• B) Inflation in 2005 compared to 2004 prices was more than that in 2002 compared to 2001 prices.
• C) The deflation rate was 5% in the year 2005.
• D) The inflation rate fell between 2004 and 2005.

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Definitions:

Consumer Surplus

The contrast between the total payment consumers are willing and financially able to make for a good or service and the amount they truly pay.

Producer Surplus

The discrepancy between the price producers agree to sell a good for and the price they actually end up receiving.

Economic Efficiency

A condition in which resources are allocated in the most effective way possible, maximizing outputs from given inputs without waste.

Allocative Efficiency

A state of resource allocation where goods and services are distributed according to consumer preferences, reflecting an optimal distribution of resources.