ECONOMICS
INFLATION
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Question
[CLICK ON ANY CHOICE TO KNOW THE RIGHT ANSWER]
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An increase in the supply of cash printed by the central bank
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An increase in Oil prices
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A reduction in income tax
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An improvement in technology
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Detailed explanation-1: -This could be due to lower oil prices or improved technology, e.g. development of computer chips which enables price of manufactured goods to fall.
Detailed explanation-2: -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).
Detailed explanation-3: -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-4: -Deflation is the general decline of the price level of goods and services. Deflation is usually associated with a contraction in the supply of money and credit, but prices can also fall due to increased productivity and technological progress.
Detailed explanation-5: -Deflation Creates Higher Rates of Unemployment In response to falling revenue, companies are forced to cut pay and layoff workers. This results in increased unemployment, incomes declining and consumer confidence decreasing.