Deflation during a recession is of concern to economists because:
A) falling prices lead consumers to delay purchases and further reduce spending.
B) workers will demand wage increases to offset the effects of deflation.
C) the government is powerless to stop it.
D) it is generally followed by periods of hyperinflation.

Question

Quizplus · Accepted Answer

Deflation can lead to a decrease in consumer spending as people anticipate lower prices in the future, which can further reduce economic activity and exacerbate a recession.

Deflation During a Recession Is of Concern to Economists Because