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Changes in the general price level are classified based on their direction and rate of change. A positive change, representing a general rise in prices, is termed inflation. A negative change, indicating a general fall in prices, is known as deflation. Disinflation refers to a scenario where inflation is still positive, but the rate of price increase has slowed compared to a previous period.

Classification of Price Level Changes: Inflation, Deflation, and Disinflation

An economy reports the following annual percentage change in its general price level over a three-year period:

*   Year 1: +5.0%
*   Year 2: +2.0%
*   Year 3: -1.0%

Based on this data, which statement accurately describes the economic situation occurring between the end of Year 1 and the end of Year 2?

An economist is analyzing the price level changes in a country over four consecutive years. The annual rates of change were as follows:

*   Year 1: +3.0%
*   Year 2: +1.5%
*   Year 3: +0.5%
*   Year 4: -0.5%

Identify and explain the specific economic term that best describes the change occurring between Year 1 and Year 3, and the term that best describes the situation in Year 4.

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