Deflation Can Be a Problem Because It

question 231

Multiple Choice

Deflation can be a problem because it

• A) leads to higher wages.
• B) makes it more difficult to pay off debt.
• C) can easily become hyperinflation.
• D) increases interest rates.

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Definitions:

Diseconomies of Scope

The phenomenon where a company’s costs increase as it produces more varied types of products or services, due to inefficiencies.

Returns to Scale

The rate at which output increases as inputs are increased proportionately.

Economies of Scope

Cost advantages companies experience when they increase the variety of products produced, as opposed to increasing the volume of a single product (economies of scale).

Joint Cost Curve

Refers to a graph showing the costs shared by products in the process of being produced together up to a split-off point.