Price deflation:
A) Tends to force both real and nominal interest rates lower
B) Tends to increase investment spending and the development of new jobs
C) Will cause lenders to gain at the expense of borrowers
D) All of the above
E) None of the above

Question

Quizplus · Accepted Answer

Price deflation increases the real value of money over time, which benefits lenders as they receive back money that is worth more in terms of purchasing power than when they lent it out. Borrowers, on the other hand, end up repaying their loans with money that is more valuable than when they borrowed it, effectively paying more in real terms.

Price Deflation