The Reduction in Aggregate Demand Caused by Deflation

question 131

Multiple Choice

The reduction in aggregate demand caused by deflation:

• A) further reduces prices, causing a deflationary spiral.
• B) decreases production and raises prices back to their original level.
• C) further reduces prices, causing aggregate supply to shift back to its long-run equilibrium.
• D) decreases production and increase prices, mitigating the effects of the initial deflation.

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Definitions:

Centralization

The concentration of decision-making authority at the top levels of an organization's management hierarchy.

Power Sharing

A practice or arrangement where control, authority, or influence over decision-making processes is distributed among various stakeholders or groups to ensure fair and equitable participation.

Prolonged

Continuing for a long time or longer than usual.

Highly Political

Describes environments or situations where power dynamics, influence, and strategic maneuvers play a significant role in decision-making and outcomes.