When an economy experiences deflation, consumption decreases because:
A) people will wait for prices to drop before spending.
B) shoe-leather costs increase.
C) savings accounts lose value.
D) the prices of imports increase.

Question

Quizplus · Accepted Answer

When an economy experiences deflation, people tend to delay their spending since they expect the prices of goods to fall further in the future. Hence, consumption decreases.

When an Economy Experiences Deflation, Consumption Decreases Because