Which of the following is true of de?ation?
A) De?ation is likely to bene?t the economy because prices have fallen, making goods more affordable.
B) De?ation raises the real value of debt, making previously incurred debts less affordable.
C) De?ation refers to a sustained increase in the general price level.
D) A long period of de?ation is consistent with a high level of employment in the economy.

Question

Quizplus · Accepted Answer

De?ation increases the real value of debt because as prices fall, the real value of money increases, making it more expensive in real terms to pay back previously incurred debts. This can lead to reduced consumption and investment, negatively impacting the economy.

Which of the Following Is True of De?ation