In macroeconomics, what is the slowdown in the rate of increase of the general price level of goods and services in a country's GDP over time (that is, inflation is still positive but rising more slowly) called?

Introduction / Context:
In macroeconomics, it is important to distinguish between different price level phenomena such as inflation, deflation, disinflation, reflation, and stagflation. Although these terms sound similar, they refer to different situations in an economy. This question asks specifically about a situation where prices are still rising, but the pace at which they rise has slowed down compared to earlier periods. Understanding the correct term for this situation helps in interpreting economic reports and central bank statements.

Given Data / Assumptions:

• The focus is on the rate of increase of the general price level, not just the price level itself.
• Prices are still going up; inflation is positive.
• The rate at which prices are increasing has slowed down over time.
• We are not dealing with an absolute fall in prices or a situation of zero inflation.
• The options offer definitions of deflation, disinflation, inflation, reflation, and stagflation.

Concept / Approach:
Inflation is the sustained increase in the general price level of goods and services over time. Disinflation is a reduction in the rate of inflation, meaning that inflation is still present but at a slower pace than before. Deflation refers to a sustained fall in the overall price level, where inflation becomes negative. Reflation is an attempt through policy to raise the general price level from a period of deflation or very low inflation. Stagflation combines stagnant or falling output with high inflation. Because the question clearly describes a slowdown in the rate of increase of prices without indicating that prices are actually falling, the correct term is disinflation.

Step-by-Step Solution:
Step 1: Identify the key condition in the question: the rate of increase of prices is slowing down, but prices are still increasing.Step 2: Recognise that if prices were falling, we would be dealing with deflation, but the question does not mention any fall.Step 3: Recall the definition of disinflation: a reduction in the rate of inflation, where inflation remains positive but gradually declines.Step 4: Understand that plain inflation refers to the presence of rising prices, not to the change in the inflation rate itself.Step 5: Reflation refers to policy interventions to raise prices back to a desired level and is not simply a slowdown in inflation.Step 6: Stagflation includes both high inflation and stagnant output, which is not described in the question.Step 7: Therefore, the situation described matches disinflation.

Verification / Alternative check:
To verify, imagine annual inflation rates changing from 8 per cent to 6 per cent to 4 per cent over three years. Prices are still increasing each year, but the inflation rate is declining. Economists call this pattern disinflation, not deflation, because the price level continues to rise. In deflation, the inflation rate would turn negative, such as -2 per cent, meaning the price level actually falls. This simple numerical illustration confirms that the slowdown in the rate of increase in prices is best described as disinflation.

Why Other Options Are Wrong:
Deflation (a sustained fall in the general price level): This requires the price level to decline, which is not stated in the question.

Inflation (a continuous rise in the general price level): This describes rising prices but says nothing about the change in the rate of inflation.

Reflation (a deliberate policy to raise prices from a low level): This is a policy action, not a description of a slowing inflation rate.

Stagflation (high inflation with stagnation of output): This combines inflation with poor growth, which goes beyond the question focus on price behaviour alone.

Common Pitfalls:
Many learners mistakenly use deflation and disinflation interchangeably, but they are different. Deflation implies falling prices and can be harmful because it may discourage spending and investment. Disinflation, on the other hand, often reflects a successful monetary policy that is gradually bringing high inflation down to a more comfortable level. Remembering that disinflation refers to a slowdown in inflation, while deflation refers to actual price declines, helps avoid confusion in exam questions and economic discussions.

Final Answer:
The slowdown in the rate of increase of prices over time is called disinflation.