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

examrobotsa's picture

Submitted by examrobotsa on

Q: 112 (CDS-II/2012)
Which one among the following is an appropriate description of ‘deflation?

question_subject: 

Economics

question_exam: 

CDS-II

stats: 

0,101,32,10,6,101,16

keywords: 

{'deflation': [0, 0, 2, 1], 'inflation': [0, 1, 0, 3], 'persistent recession': [0, 0, 1, 1], 'currency': [0, 1, 0, 3], 'persistent fall': [0, 0, 1, 1], 'sudden fall': [0, 0, 2, 2], 'economy': [1, 3, 8, 35], 'fall': [3, 0, 3, 5], 'other currencies': [0, 0, 1, 3], 'general price level': [0, 0, 1, 1], 'value': [0, 0, 1, 0], 'rate': [2, 3, 13, 20]}

Option 1: It is a sudden fall in the value of a currency against other currencies.

This option is incorrect as it describes currency depreciation, which is different from deflation. Deflation refers to a decrease in the general price level of goods and services, not a fall in the value of a currency.

Option 2: It is a persistent recession in the economy.

This option is also incorrect as it describes a recession, which is a period of economic decline. While deflation can occur during a recession, it is not the same thing. Deflation specifically refers to a decrease in the overall price level, not just a recession.

Option 3: It is a persistent fall in the general price level of goods and services.

This option is the correct definition of deflation. Deflation occurs when there is a sustained decrease in the prices of goods and services in an economy. This can negatively impact businesses and consumers, as it can lead to lower spending and investment.

Option 4: It is a fall in the rate of inflation over a period of time.

This option is incorrect. While deflation can be caused by a fall in the rate of inflation, it is not solely defined by this. Deflation refers specifically to a decrease in the general price level, while