Suppose the Value of the CPI Is 1

Multiple Choice

Suppose the value of the CPI is 1.100 in year one, 1.160 in year two, and 1.270 in year three.Assume also that the price of computers increases by 3% between year one and year two, and by another 3% between year two and year three.The price level is increasing, the inflation rate is _______, and the relative price of computers is _________.

A) increasing; increasing
B) constant; increasing
C) constant; decreasing
D) increasing; decreasing