During a Period of Deflation

question 95

Multiple Choice

During a period of deflation,

• A)The price level rises.
• B)People on fixed incomes are better off.
• C)People who hold cash are worse off.
• D)Lenders are worse off.

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Definitions:

Economic Loss

The monetary value of the decrease in welfare or trade-offs resulting from an economic transaction or decision, beyond just the physical loss.

Product Differentiation

The strategy of setting a product or service apart from others in the industry to enhance its attractiveness to a specific target group.

Allocative Efficiency

A condition of distributing resources in which improving the situation of one person necessitates the detriment of another.

Long-Run Equilibrium

A state in which all factors of production can be adjusted, markets clear, and no economic agents have the incentive to change their behavior.