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Prices fell.

Effectively the same basket of goods cost $123 in year 1 and $117 in year two.

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Q: The CPI was 123 in year 1 and 117 in year 2 did the prices rise or fall between year 1 and year 2?
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Inflation is defined as?

Inflation is when..... say a sweet cost 50p one year and the next 1 pound then you have to go borrow the extra 50p to buy the sweet


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The nominal GNP is the value of all the production valued at this year's prices. Real GNP is valued at prices of a base year. Thus, if an economy produces in year 1 2 oranges and 3 apples, at prices 5 and 6 respectively and in year 2, 4 oranges and 6 apples, at prices 9 and 8, then:nominal GDP year 1=2*5+3*6=28nominal GDP year 2= 4*9+6*8=84Notice that you can not compare production between two years because prices increased. It is not correct to state that production multiply by 3. So you should compute real GNP at prices of year 1Real GDP year 1 (at prices of year 1) = 28 (same as before)Real GDP year 2 (at prices of year 1) = 4*5+6*6=56


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