Deflation Refers to a Situation Where

question 99

Multiple Choice

Deflation refers to a situation where:

• A) Price level falls, and could be caused by a shift of AD to the left
• B) Price level falls, and could be caused by a decrease in aggregate supply
• C) The rate of inflation falls, and could be caused by a shift of AS to the right
• D) The rate of inflation rises, and could be caused by an decrease in aggregate demand

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Definitions:

Average Tax Rate

The fraction of total income that is paid as taxes, calculated by dividing the total amount of taxes paid by the taxpayer's total income.

Marginal Tax Rate

The tax rate that applies to the next dollar of taxable income, indicating the percentage of any additional earnings that will be paid in taxes.

Progressive Tax

A tax system in which the tax rate increases as the taxable amount goes up, making higher earners pay a larger percentage of their income than lower earners.

Government Borrowing

The process by which a government finances its expenditure by borrowing money, typically through issuing bonds.