According to Keynes, Why Might Deflation Create Problems for an Economy

question 63

Multiple Choice

According to Keynes, why might deflation create problems for an economy?

• A)Consumers might expect prices to fall further and cut back consumption now.
• B)In expectation of increased spending, too many entrepreneurs would begin businesses and most would fail.
• C)Producers might increase production to take advantage of falling input prices.
• D)People would drop out of unions because unions would become ineffective at keeping wages of members high.

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