When an economy experiences deflation, consumption will:
A) decrease, because people will want to wait for prices to drop before spending.
B) increase, because people will want to wait for prices to drop before spending.
C) decrease, because people will lose value in their savings.
D) increase, because people will lose value in their savings.

Question

Quizplus · Accepted Answer

When there is deflation, the price of goods and services decreases. This means that people can purchase the same amount of goods and services for less money. As a result, people may be inclined to wait before making purchases in order to benefit from even lower prices in the future. This delay in consumption can lead to a decrease in overall consumption in the economy.

When an Economy Experiences Deflation, Consumption Will