ECONOMICS (CBSE/UGC NET)

Detailed explanation-1: -Deflation can be controlled by using various monetary policy measures. Quantitative easing, cutting tax rates, lowering interest rates, open market operations, lowering bank reserve limits, increasing spending by the Government are the ways in which deflation can be controlled.

Detailed explanation-2: -When the Fed increases the money supply, it lowers the interest rate and increases the quantity of goods and services demanded at any given price level, shifting aggregate-demand to the right.

Detailed explanation-3: -Changes in the price level (inflation or deflation) When there is an increase in the price level, the demand for money increases. Conversely, when there is a decrease in the price level, the demand for money decreases.

Detailed explanation-4: -Deflation occurs when the price levels in an economy decline, where people prefer to hoard cash instead of spending it on goods that will be cheaper in the future.