Deflation is a problem for all of the following reasons except it:
A)is often associated with large falls in asset prices.
B)may prevent a central bank from lowering the real interest rate as much as it would like.
C)can undermine a country's financial system.
D)can lead to excessive increases in aggregate demand.

Question

Quizplus · Accepted Answer

Deflation can actually lead to a decrease in aggregate demand as consumers delay purchases in anticipation of even lower prices in the future. It does not cause excessive increases in aggregate demand.

Deflation Is a Problem for All of the Following Reasons