Which of the following is the best description of disinflation?
A. A decrease in the price of food and fuel
B. Prices increasing faster than before
C. A slowdown in the rate of inflation
D. When inflation turns into deflation
Answer (2)
The correct answer is letter C. A slowdown in the rate of inflationDisinflation is when prices are still rising, but at a slower pace than before. It doesn’t mean prices are going down—it means inflation is cooling off.For example, if inflation in the Philippines was 6.5% in February and drops to 5.8% in March, that is disinflation. The cost of goods is still going up, just not as fast.Disinflation is usually a good sign. It means that policies—like the BSP raising interest rates—are starting to work. Consumers may feel some relief, especially if wage growth starts to catch up with price growth.This can also lead to more confidence among investors, businesses, and families. However, if disinflation continues too far, it may risk sliding into deflation, which is a worse scenario.
The best description of disinflation is C. A slowdown in the rate of inflation.Disinflation means that prices are still rising, but at a slower pace than before. Inflation is positive but decreasing. It is different from deflation, which is an actual drop in prices.
