Choose the statement that is incorrect.
A)An economy experiences deflation when it has a persistently falling price level.
B)During a period of deflation, the inflation rate is negative.
C)A one-time fall in the price level is not deflation.
D)The price level falls if aggregate supply increases at a persistently slower rate than aggregate demand.
E)Deflation can end if the central bank ensures that the quantity of money grows at the target inflation rate plus the growth rate of potential GDP minus the growth rate of the velocity of circulation.

Question

Quizplus · Accepted Answer

An increase in aggregate supply at a slower rate than aggregate demand would typically lead to inflation, not a fall in the price level.

Choose the Statement That Is Incorrect