Which one of the following statements is an appropriate description of deflation ?

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Q: 19 (IAS/2010)
Which one of the following statements is an appropriate description of deflation ?

question_subject: 

Economics

question_exam: 

IAS

stats: 

0,216,97,35,12,216,50

keywords: 

{'deflation': [0, 0, 2, 1], 'inflation': [0, 1, 0, 3], 'persistent recession': [0, 0, 1, 1], 'currency': [0, 1, 0, 3], 'economy': [1, 3, 8, 35], 'fall': [3, 0, 3, 5], 'persistent fall': [0, 0, 1, 1], 'sudden fall': [0, 0, 2, 2], 'real sectors': [0, 0, 1, 0], 'other currencies': [0, 0, 1, 3], 'general price level': [0, 0, 1, 1], 'value': [0, 0, 1, 0]}

Deflation refers to a persistent and sustained decrease in the general price level of goods and services in an economy over a period of time. This means that prices of most goods and services fall over time, resulting in an increase in the purchasing power of money. It is the opposite of inflation, which refers to a persistent increase in the general price level of goods and services over time.

Deflation can be caused by several factors such as a decrease in demand for goods and services, a decrease in money supply, or an increase in productivity. Deflation can have both positive and negative effects on the economy. On the positive side, deflation can lead to an increase in the real value of money and a decrease in interest rates, which can stimulate investment and economic growth. On the negative side, deflation can lead to a decrease in aggregate demand, causing unemployment and a slowdown in economic growth.

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