ECONOMICS (CBSE/UGC NET)

Detailed explanation-1: -What Causes Deflation? There are two big causes of deflation: a decrease in demand or growth in supply. Each is tied back to the fundamental economic relationship between supply and demand. A decline in aggregate demand leads to a fall in the price of goods and services if supply does not change.

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 the opposite of inflation. While inflation is characterized by the decreasing value of money and rising prices, deflation is associated with falling prices and an increase in the value of money.

Detailed explanation-4: -Deflation is a general decline in prices for goods and services, typically associated with a contraction in the supply of money and credit in the economy. During deflation, the purchasing power of currency rises over time.