Glasvania, a European country, experiences a period of economic downturn that results in high unemployment. With most of its citizens out of work and having limited money to spend, the country's economy is dictated by low sales. Given the situation, all buyers are compelled to reduce their prices by a large margin. This scenario exemplifies _____.

Question

Quizplus · Accepted Answer

The situation described is an example of deflation, which is the sustained decrease in the general price level of goods and services in an economy. This is usually caused by a decrease in demand, which leads to lower prices as businesses try to entice customers to buy their products.

Glasvania, a European Country, Experiences a Period of Economic Downturn