Deflation

question 155

Multiple Choice

Deflation

• A) automatically implies that,on average,everyone is better off because prices have fallen.
• B) is the same as disinflation; it means the rate of inflation has fallen.
• C) will make you better off if your nominal wages fall more slowly than prices.
• D) will make you better off if your nominal wages fall more rapidly than prices.
• E) will make you better off if your real wages fall more rapidly than prices.

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Definitions:

External Costs

External costs, also known as negative externalities, are the costs experienced by third parties who are not involved in an economic transaction, often not reflected in market transactions.

Market Price

The market price at which you can currently buy or sell a service or asset.

Efficient Equilibrium

A state in an economy where every resource is optimally allocated to serve each individual or entity in the best way while minimizing waste and inefficiency.

External Benefits

Benefits resulting from a transaction that affect parties not directly involved in the transaction, often leading to positive outcomes for society.