Deflation Is Not a Sensible Policy Goal Because Deflation

question 118

Multiple Choice

Deflation is not a sensible policy goal because deflation

• A) increases the purchasing power of money.
• B) decreases the purchasing power of money.
• C) leaves the purchasing power of money unchanged.
• D) is associated with weak or negative economic growth.
• E) promotes investment in capital goods.

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Definitions:

Productivity of Labor

A measure of economic performance that calculates the output of goods and services per unit of labor input.

Technology

The application of scientific knowledge for practical purposes, especially in industry and in the creation of innovations and inventions.

Real Wages

Wages adjusted for inflation, representing the true purchasing power of income.

Capital Equipment

Capital equipment consists of tangible assets such as buildings, machinery, and tools that are used in the production process to generate goods and services.