Choose the statement that is incorrect.
A)The price level falls if aggregate supply increases at a persistently slower rate than aggregate demand.
B)Deflation can end if the central bank ensures that the quantity of money grows at the target inflation rate plus the growth rate of potential GDP minus the growth rate of the velocity of circulation.
C)A one- time fall in the price level is not deflation.
D)An economy experiences deflation when it has a persistently falling price level.
E)During a period of deflation, the inflation rate is negative.

Question

Quizplus · Accepted Answer

A) is incorrect because if aggregate supply increases at a persistently slower rate than aggregate demand, it typically leads to an increase in the price level, not a fall.

Choose the Statement That Is Incorrect