Deflation exists whenever:
A)the overall price level falls.
B)the overall price level rises.
C)the economy experiences a contraction.
D)the price of a good decreases.

Question

Deflation exists whenever:
A)​the overall price level falls.
B)​the overall price level rises.
C)​the economy experiences a contraction.
D)​the price of a good decreases.

Quizplus · Accepted Answer

Deflation occurs when the overall price level falls, which means the purchasing power of money increases. This can happen due to various reasons such as a decrease in demand for goods and services, increase in productivity or efficiency, or a decrease in the money supply. Deflation does not occur with the rise in the overall price level, contraction of the economy, or decrease in the price of a single good.

Deflation Exists Whenever