Deflation is the situation when
A) the rate at which prices increase falls.
B) the average of all prices is declining.
C) the real rate of interest is negative.
D) some prices are increasing and some are declining.

Question

Quizplus · Accepted Answer

Deflation is a situation where the average of all prices is declining over a period of time. This is opposite to inflation, where the average of all prices is rising. Deflation can lead to a decrease in demand, as consumers may postpone purchases in anticipation of further price decreases, which can lead to a further decline in economic activity.

Deflation Is the Situation When