The net result of deflation is to:
A) decrease consumption and investment, decreasing aggregate demand.
B) decrease consumption and increase investment, decreasing aggregate demand overall.
C) increase consumption and investment, increasing aggregate demand.
D) increase consumption and decrease investment, increasing aggregate demand overall.

Question

Quizplus · Accepted Answer

Deflation leads to a reduction in prices, which can appear attractive to consumers but can also lead to a decrease in consumption as people delay purchases in anticipation of further price decreases. As consumption decreases, businesses earn less revenue, which can lead to a decrease in investment as well. These factors ultimately lead to a decrease in aggregate demand.

The Net Result of Deflation Is To