Declining inflation rate shows slowing price growth

Steps:

• Inflation rate measures the percentage change in CPI over a period.
• In year 1, CPI rose by 3%, indicating moderate price increases.
• Three years later, CPI rose by only 0.5%, a lower percentage change.
• The drop from 3% to 0.5% confirms the inflation rate decreased.

Why B is correct:

• By definition, inflation rate is the speed of price increases; falling from 3% to 0.5% means prices are rising more slowly.

Why the others are wrong:

• A: 0.5% inflation means prices are still rising, not falling (deflation would be negative).
• C: Real interest rate requires nominal rate data, which is absent.
• D: Low inflation aids fixed incomes, but no direct evidence of increased purchasing power over the period.

Final answer: B