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Q112 (CDS-II/2012) Economy › Money, Banking & Inflation › Inflation concepts Answer Verified

Which one among the following is an appropriate description of ‘deflation?

Result
Your answer: —  ·  Correct: C
Explanation

Deflation is defined as a persistent or sustained decrease in the general price level of goods and services throughout an economy [2]. It occurs when the inflation rate becomes negative, effectively increasing the purchasing power of money [2]. This is distinct from 'disinflation', which refers to a slowing down in the rate of inflation where prices are still rising but at a slower pace [1]. While deflation is often associated with economic recessions, unemployment, and falling demand, the term itself specifically describes the price level movement rather than the state of the business cycle [2]. Option 1 describes currency depreciation or devaluation, and Option 4 describes disinflation [1]. Therefore, the most appropriate description of deflation is a persistent fall in the general price level [2].

Sources

  1. [2] Indian Economy, Nitin Singhania .(ed 2nd 2021-22) > Chapter 4: Inflation > Deflation > p. 74
  2. [1] Indian Economy, Vivek Singh (7th ed. 2023-24) > Chapter 2: Money and Banking- Part I > There are mainly two causes of inflation: > p. 113
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SIMILAR QUESTIONS

IAS · 2010 · Q18 Relevance score: 6.50

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

CAPF · 2009 · Q73 Relevance score: -1.15

Consider the following statements : 1. When the inflation decreases, but still remains positive, it is deflation. 2. Deflation reduces the real value of money over time. 3. Historically not all episodes of deflation correspond with periods of poor economic growth. Which of the statements given above is/are correct ?

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In the context of Indian economy, consider the following pairs: Term Most appropriate description 1. Melt down Fall in stock prices 2. Recession Fall in growth rate 3. Slow down Fall in GDP

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The sustained decrease in the general price level is called as (a) deflation (b) stagflation (c) devaluation (d) recession

CDS-I · 2021 · Q89 Relevance score: -3.84

The situation in an economy which is growing slowly along with rapid inflation (rising price level) is called