According to Keynes, why might deflation create problems for an economy?
A)Consumers might expect prices to fall further and cut back consumption now.
B)In expectation of increased spending, too many entrepreneurs would begin businesses and most would fail.
C)Producers might increase production to take advantage of falling input prices.
D)People would drop out of unions because unions would become ineffective at keeping wages of members high.

Question

Quizplus · Accepted Answer

Deflation can lead to consumers delaying their purchases in anticipation of further price decreases, which reduces consumption and can negatively impact economic growth.

According to Keynes, Why Might Deflation Create Problems for an Economy