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Which of the following best defines deflation?
- a)An increase in the general level of prices
- b)A decrease in the general level of prices
- c)An increase in the money supply
- d)A decrease in the money supply
Correct answer is option 'B'. Can you explain this answer?
Most Upvoted Answer
Which of the following best defines deflation?a)An increase in the gen...
Explanation:
Deflation
Deflation is the opposite of inflation and refers to a decrease in the general level of prices of goods and services in an economy. It occurs when the supply of goods and services exceeds the demand for them, leading to a decrease in prices.
Effects of Deflation
- Lower consumer spending: When prices are falling, consumers may postpone purchases in anticipation of even lower prices in the future, leading to a decrease in overall spending.
- Increased debt burden: Deflation can increase the real value of debt, making it harder for individuals and businesses to repay their loans.
- Risk of recession: Persistent deflation can lead to a decrease in economic activity, potentially resulting in a recession.
Causes of Deflation
- Decrease in demand: If there is a decrease in consumer spending or investment, it can lead to a surplus of goods and services, causing prices to fall.
- Technological advancements: Improvements in technology can lead to increased productivity, resulting in lower production costs and prices.
- Tight monetary policy: Central banks may implement policies that reduce the money supply, leading to a decrease in demand and prices.
In conclusion, deflation is characterized by a decrease in the general level of prices in an economy, which can have various negative effects on consumers, businesses, and overall economic growth.
Deflation
Deflation is the opposite of inflation and refers to a decrease in the general level of prices of goods and services in an economy. It occurs when the supply of goods and services exceeds the demand for them, leading to a decrease in prices.
Effects of Deflation
- Lower consumer spending: When prices are falling, consumers may postpone purchases in anticipation of even lower prices in the future, leading to a decrease in overall spending.
- Increased debt burden: Deflation can increase the real value of debt, making it harder for individuals and businesses to repay their loans.
- Risk of recession: Persistent deflation can lead to a decrease in economic activity, potentially resulting in a recession.
Causes of Deflation
- Decrease in demand: If there is a decrease in consumer spending or investment, it can lead to a surplus of goods and services, causing prices to fall.
- Technological advancements: Improvements in technology can lead to increased productivity, resulting in lower production costs and prices.
- Tight monetary policy: Central banks may implement policies that reduce the money supply, leading to a decrease in demand and prices.
In conclusion, deflation is characterized by a decrease in the general level of prices in an economy, which can have various negative effects on consumers, businesses, and overall economic growth.
Community Answer
Which of the following best defines deflation?a)An increase in the gen...
Deflation is defined as a decrease in the general level of prices, so option B is correct.
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Which of the following best defines deflation?a)An increase in the general level of pricesb)A decrease in the general level of pricesc)An increase in the money supplyd)A decrease in the money supplyCorrect answer is option 'B'. Can you explain this answer?
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Which of the following best defines deflation?a)An increase in the general level of pricesb)A decrease in the general level of pricesc)An increase in the money supplyd)A decrease in the money supplyCorrect answer is option 'B'. Can you explain this answer? for JAMB 2025 is part of JAMB preparation. The Question and answers have been prepared according to the JAMB exam syllabus. Information about Which of the following best defines deflation?a)An increase in the general level of pricesb)A decrease in the general level of pricesc)An increase in the money supplyd)A decrease in the money supplyCorrect answer is option 'B'. Can you explain this answer? covers all topics & solutions for JAMB 2025 Exam. Find important definitions, questions, meanings, examples, exercises and tests below for Which of the following best defines deflation?a)An increase in the general level of pricesb)A decrease in the general level of pricesc)An increase in the money supplyd)A decrease in the money supplyCorrect answer is option 'B'. Can you explain this answer?.
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