Deflation refers to a:
A) decreasing relative prices.
B) decreasing price level.
C) slowing down of the rate of inflation.
D) federal government policy of running budget surpluses.

Question

Quizplus · Accepted Answer

Deflation refers to a general decrease in the overall price level of goods and services in an economy over a period of time. This is different from a decrease in relative prices where the prices of some goods may decrease while others increase. Deflation is also different from a slowing down of the rate of inflation, which means that prices are still increasing, just at a slower rate. Lastly, deflation is not a federal government policy of running budget surpluses, although such a policy could potentially contribute to deflation if it causes a decrease in spending and aggregate demand in the economy.

Deflation Refers to A