ECONOMICS
INFLATION
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Question
[CLICK ON ANY CHOICE TO KNOW THE RIGHT ANSWER]
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wages do not fall easily and firms fear price wars
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competitive markets keep prices from falling
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governments impose price floors
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firms will be unable to sell their products
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Detailed explanation-1: -Economists fear deflation because falling prices lead to lower consumer spending, which is a major component of economic growth. Companies respond to falling prices by slowing down their production, which leads to layoffs and salary reductions. This further lowers demand and prices.
Detailed explanation-2: -The correct answer is It is a persistent fall in the general price level of goods and services. Deflation-It is a persistent fall in the general price level of goods and services.
Detailed explanation-3: -Deflation is when consumer and asset prices decrease over time, and purchasing power increases. Essentially, you can buy more goods or services tomorrow with the same amount of money you have today. This is the mirror image of inflation, which is the gradual increase in prices across the economy.
Detailed explanation-4: -Causes of Deflation A decline in aggregate demand typically results in subsequent lower prices. Causes of this shift include reduced government spending, stock market failure, consumer desire to increase savings, and tightening monetary policies (higher interest rates).