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Question
Consider the following statements:
(1) Deflation is decrease in the general price level of goods and services.
(2) Deflation is the negative inflation rate which falls below 0%.
Which of the statements given above is/are correct?
Consider the following statements:
(1) Deflation is decrease in the general price level of goods and services.
(2) Deflation is the negative inflation rate which falls below 0%.
Which of the statements given above is/are correct?
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Solution
The correct option is C Both 1 and 2
When inflation rate falls below 0%, the prices of goods and services drop below their general levels. Such a situation is known as deflation. This happens when the economic growth in a country stalls, and the growth in disposable income ceases. The population demands lesser good and services compared to the supply, which creates deflationary pressures.
When inflation rate falls below 0%, the prices of goods and services drop below their general levels. Such a situation is known as deflation. This happens when the economic growth in a country stalls, and the growth in disposable income ceases. The population demands lesser good and services compared to the supply, which creates deflationary pressures.
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