Question

Consider the following statements and choose the option which is correct.

(1) Potential output is sometimes called the Natural Gross Domestic Product.

(2) When an economy has fallen into deflation demand from businesses and consumers to buy products falls as they expect to pay less later as prices fall..

(3) Deflation is the opposite of Inflation.

• A. Only 1 is correct
• B. Only 2 is correct
• C. All the above are correct
• D. None of the above is correct

Answer 1

The correct option is C All the above are correct

All the given statements in the options are true:

• Potential output is referred to as natural gross domestic output which means highest level of real gross domestic product.
  
• Deflation is the opposite of inflation. When an economy falls into deflation, demand is decreased because people think the prices may go down even more.