ECONOMICS (CBSE/UGC NET)

Detailed explanation-1: -Deflation reduces production of goods and services due to reduction in demand for goods and services from the consumers. Reduction in production of goods and services leads to reduced investments, reduction in the salaries of employees, and also increase unemployment.

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: -Decrease in consumer spending: When prices are falling, consumers may delay purchases in the hope of getting a better deal in the future. This can lead to a decrease in overall consumer spending and economic activity.

Detailed explanation-4: -Deflation creates incentives to save and postpone spending because prices will be lower and purchasing power greater in the future. This pattern depresses spending and weakens the economy.