Deflation is:
A) the average number of times a dollar is spent on final goods and services in a year.
B) mistaking changes in nominal prices for changes in real prices.
C) a decrease in the average level of prices.
D) an increase in the average level of prices.

Question

Quizplus · Accepted Answer

Deflation is a decrease in the average level of prices. It is the opposite of inflation, which is an increase in the average level of prices. Option A is describing velocity of money, option B is describing the phenomenon known as the money illusion, and option D is describing inflation.

Deflation Is