Cheaper Eggs and Gas Lead Inflation Lower in May

EconEye Admin

3 years ago

The annual inflation rate in May was 4%, a significant drop from the 9.1% annual inflation rate reported last summer. Excluding food and energy prices, “core” inflation was 5.3% for the 12 months ending in May.—npr.org

Answer the following questions to check your understanding of the story.

What information does the news clip give about the inflation rate and the price level?

Between the summer of 2022 and May 2023, the inflation rate ___________ and the price level __________.

a) decreased; decreased

b) decreased; increased

c) decreased; didn’t change

d) increased; decreased

Wrong! - What was the annual inflation rate in the summer of 2022? What was the annual inflation rate in May 2023? Did the inflation rate increase or decrease between the summer of 2022 and May 2023? What information does the positive inflation rate give about changes in the price level?

That's Right! - The annual inflation rate was 9.1% in the summer of 2022 and 4.1% in May 2023, so between the summer of 2022 and May 2023, the inflation rate decreased. With a positive rate of inflation, the price level must be increasing.

Why is the annual core inflation rate higher than the headline inflation rate of 4% in May 2023?

The annual core inflation rate is higher because _____________.

a) the prices of food and energy are falling

b) the prices of other items in the index are rising slower than the prices of food and energy are rising

c) the prices of other items in the index are falling and the prices of food and energy are rising

d) the prices of other items in the index are falling slower than the prices of food and energy are falling

Wrong! - The headline inflation rate includes the prices of food and energy, and it is lower than the core inflation rate, which excludes the prices of food and energy. What happened to the prices of food and energy?

Well Done! - The headline inflation rate includes the prices of food and energy, and it is lower than the core inflation rate, which excludes the prices of food and energy because the prices of food and energy are falling.

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