All Else Constant, If the Economy in Experiences a Deflation

question 6

Multiple Choice

All else constant, if the economy in experiences a deflation, then:

• A) the quantity demanded for money increases.
• B) the quantity demanded for money decreases.
• C) demand for money increases.
• D) demand for money decreases.

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Definitions:

Weak Axiom

In the context of consumer choice theory, it is a postulate stating that if a consumer prefers bundle A over bundle B when both are affordable, then she will not choose B when A becomes more affordable.

Revealed Preferences

The theory that consumers' preferences can be determined by their purchasing habits and behavior rather than through their expressed desires or responses to surveys.

Preferences

The subjective tastes or desires of individuals or entities, which determine their choices among various options.

Inferior Good

A type of good for which demand decreases as the income of consumers increases, contrasting with normal goods.