Deflation refers to a situation in which
A) the inflation rate decreases.
B) the average of all prices is falling.
C) there is a recession and inflation.
D) prices are not changing.

Question

Quizplus · Accepted Answer

Deflation occurs when the average of all prices is falling. This can lead to economic problems such as decreased demand and increased debt burdens. A decrease in the inflation rate (A) may still result in positive inflation, not deflation. A recession and inflation (C) are not characteristic of deflation. Prices not changing (D) is a situation of inflation or stable prices, but not deflation.

Deflation Refers to a Situation in Which