Negative Inflation as Deflation

Steps:

• Inflation measures the rate of change in the general price level, typically via the Consumer Price Index (CPI).
• A negative inflation rate indicates deflation, where the overall price level decreases over the period.
• Deflation directly lowers the average cost of goods and services for consumers.
• Thus, the best description links to a fall in living expenses.

Why A is correct:

• Negative inflation, or deflation, means prices fall, reducing the cost of living as measured by CPI changes.

Why the others are wrong:

• B: Purchasing power increases with deflation, but this describes an effect on money's value, not the direct price situation.
• C: Standard of living may not increase, as deflation can signal economic downturns harming wages and employment.
• D: An increase in CPI defines positive inflation, opposite of negative.

Final answer: A