A decrease in the average level of prices of goods and services is known as:
A) Deflation.
B) The business cycle.
C) A recession.
D) Inflation.

Question

Quizplus · Accepted Answer

Deflation refers to a decrease in the general level of prices which causes the purchasing power of money to increase. This is the opposite of inflation, which is an increase in the general level of prices. The business cycle refers to the fluctuation of economic activity over time, including periods of expansion and recession. A recession is a period of economic decline, often marked by high unemployment, falling GDP, and contraction in industrial production. Therefore, the only option that accurately describes a decrease in prices is deflation.

A Decrease in the Average Level of Prices of Goods