If There Is Too Much Deflation

question 116

Multiple Choice

If there is too much deflation:

• A) people will switch from money to real assets.
• B) the nominal interest rate will be constrained by the zero interest rate bound.
• C) lenders will be harmed.
• D) aggregate demand will increase.

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Definitions:

Directly Proportional

A relationship between two variables wherein they increase or decrease at the same ratio.

Fifth Power

Raising a number or expression to the exponent of five, multiplying it by itself four times.

Hooke's Law

A principle of physics that states the force needed to extend or compress a spring by some distance is proportional to that distance.

Spring Scale

A scale that measures weight or force by the stiffness of springs.