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Consider the following statements.
1. Deflation is the general level of prices is falling over some time.
2. Disinflation means a reduction in the level of national income and output, unlike the deflation.
Which of these statements is/are correct?
- a)1 Only
- b)2 Only
- c)Both 1 and 2
- d)None of them
Correct answer is option 'A'. Can you explain this answer?
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Verified Answer
Consider the following statements. 1. Deflation is the general level ...
- When the general level of prices is falling over some time this is deflation, the opposite situation of inflation.
- It is also known as disinflation. But in contemporary economics deflation or disinflation not used to indicate fall in prices.
- In policy terms, deflation or disinflation means a reduction in the level of national income and output, usually accompanied by a fall in the general price level.
Most Upvoted Answer
Consider the following statements. 1. Deflation is the general level ...
Deflation and Disinflation:
Deflation is a decrease in the general price level of goods and services in an economy over some time. It is the opposite of inflation. In other words, deflation means that the value of money is increasing, and therefore, prices are decreasing.
Disinflation, on the other hand, means a reduction in the rate of inflation. It is not the same as deflation because prices are still rising, just at a slower rate.
Explanation:
The given statements are:
1. Deflation is the general level of prices is falling over some time.
2. Disinflation means a reduction in the level of national income and output, unlike the deflation.
Statement 1 is correct. Deflation is a situation where the general level of prices is falling over some time. This can happen due to various reasons, such as a decrease in demand, an increase in supply, or a decrease in the money supply.
However, statement 2 is incorrect. Disinflation is a situation where the rate of inflation is decreasing, but the general level of prices is still rising. It does not mean a reduction in the level of national income and output.
Conclusion:
Thus, the correct answer is option 'A' - 1 Only. Deflation is the situation where the general level of prices is falling over some time, while disinflation is a situation where the rate of inflation is decreasing, but the general level of prices is still rising.
Deflation is a decrease in the general price level of goods and services in an economy over some time. It is the opposite of inflation. In other words, deflation means that the value of money is increasing, and therefore, prices are decreasing.
Disinflation, on the other hand, means a reduction in the rate of inflation. It is not the same as deflation because prices are still rising, just at a slower rate.
Explanation:
The given statements are:
1. Deflation is the general level of prices is falling over some time.
2. Disinflation means a reduction in the level of national income and output, unlike the deflation.
Statement 1 is correct. Deflation is a situation where the general level of prices is falling over some time. This can happen due to various reasons, such as a decrease in demand, an increase in supply, or a decrease in the money supply.
However, statement 2 is incorrect. Disinflation is a situation where the rate of inflation is decreasing, but the general level of prices is still rising. It does not mean a reduction in the level of national income and output.
Conclusion:
Thus, the correct answer is option 'A' - 1 Only. Deflation is the situation where the general level of prices is falling over some time, while disinflation is a situation where the rate of inflation is decreasing, but the general level of prices is still rising.
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Consider the following statements. 1. Deflation is the general level of prices is falling over some time.2. Disinflation means a reduction in the level of national income and output, unlike the deflation.Which of these statements is/are correct?a) 1 Onlyb) 2 Onlyc) Both 1 and 2d) None of themCorrect answer is option 'A'. Can you explain this answer?
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