Which of the Following Is a Major Problem with Deflation

question 103

Multiple Choice

Which of the following is a major problem with deflation?

• A) Money loses value so rapidly that economic agents will be reluctant to hold money.
• B) Economic agents tend to put off purchases in anticipation of lower prices for goods and services, leading to a downward spiral in economic activity.
• C) Low prices for goods and services tend to result in massive shortages in most markets.
• D) Money supply cannot keep pace with consumption spending.

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Definitions:

Adaptive Coping

Strategies used to adjust to stressors in a healthy and constructive manner.

Catharsis

The release of emotional tension.

Denial

A psychological defense mechanism in which confrontation with a personal problem or with reality is avoided by denying the existence of the problem or reality.

Displacement

A defense mechanism where an individual redirects a negative emotion from its original source to a safer target.