Which one of the following is true about deflation?
A)It is associated with stagflation.
B)It occurs whenever an inflationary gap gets large enough.
C)It precedes periods of high investment.
D)It is a period of decreases in the general price level.

Question

Quizplus · Accepted Answer

Deflation is a period of decreases in the general price level. It is the opposite of inflation, where prices are rising. Stagflation is a combination of stagnant economic growth and high inflation. Deflation does not necessarily precede periods of high investment, and it is not caused by a large inflationary gap, which is a situation where the actual output exceeds potential output.

Which One of the Following Is True About Deflation