If i stands for the interest rate, g stands for the growth rate, and io stands for the growth-adjusted interest rate, which of the following is associated with deflation? A)i g 0 (io 0) B)i g 0 (io 0 (io = 0) D)g 0) E)i = g = 0

Question

If i stands for the interest rate, g stands for the growth rate, and io stands for the growth-adjusted interest rate, which of the following is associated with deflation? A)i > g > 0 (io > 0) B)i > g > 0 (io < 0) C)i = g > 0 (io = 0) D)g < 0 (io > 0) E)i = g = 0

Quizplus · Accepted Answer

Deflation is characterized by a decrease in the general price level of goods and services, which can be represented by a negative growth rate (g < 0). The condition where the growth-adjusted interest rate (io) is positive (io > 0) while the growth rate is negative (g < 0) aligns with a deflationary scenario.

If I Stands for the Interest Rate, G Stands for the Growth