Which term describes a decline in the rate of price increases, with prices still rising?

• A. Inflation
• B. Deflation
• C. Hyperinflation
• D. Disinflation

Answer: (D)

Disinflation is the situation where prices keep rising, but the rate of that increase slows down. In other words, the price level is still higher than before, but the pace of inflation has eased. For example, if prices were climbing at 4% one year and 2% the next, inflation is occurring but at a slower rate—disinflation. Inflation refers to prices rising in general, deflation means prices actually fall, and hyperinflation is an extreme, out-of-control rise in prices. So when the price level is still increasing but at a reduced rate, disinflation is the right term.