Which of the Following Is NOT a Consequence of Deflation

question 39

Multiple Choice

Which of the following is NOT a consequence of deflation?

• A) Deflation causes uncertainty about the future.
• B) The threat of deflation can make people reluctant to borrow for long periods.
• C) Deflation causes the real value of money to fall.
• D) Firms may be reluctant to undertake investments for fear that the prices at which they can sell their output will drop.

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Definitions:

Demand Decrease

Demand decrease refers to a downward shift in the demand curve, indicating that consumers are willing to purchase less of a good at any given price.

General Equilibrium Analysis

An economic framework for understanding how supply and demand interact across multiple markets to determine prices in an entire economy.

Feedback Effects

The process where outcomes or outputs of a system loop back to influence the inputs or initial conditions, often amplifying or dampening effects in the system.

Partial Equilibrium

An analysis of equilibrium within a specific market or sector, ignoring interactions with other markets or the effects of changes in them.