Deflation is defined as a situation in which
A) the rate of inflation is below 2 percent.
B) the average of all prices of goods and services in an economy is falling.
C) the value of the dollar is rising relative to other currencies.
D) the Gross Domestic Product's growth rate is less for a given quarter than it was for the prior quarter.

Question

Quizplus · Accepted Answer

Deflation occurs when the average prices of goods and services in an economy fall. This means that the value of money increases, as it can buy more goods and services than before. It is the opposite of inflation, which is defined as a situation where prices of goods and services increase over time. Option A is incorrect, as low inflation does not necessarily mean deflation. Option C is incorrect, as the increase in the value of the dollar relative to other currencies does not necessarily lead to deflation. Option D is incorrect, as GDP growth rate is not a direct indicator of deflation.

Deflation Is Defined as a Situation in Which