Question

Which one of the following statements refers to "disinflation"?

• A. A simultaneous existence of high rate of inflation and high unemployment in a country.
• B. A process of reversing inflation but without creating unemployment and reducing output.
• C. A policy of moderating rising prices and also to pull the system out of the depth of depression.
• D. A situation of general depression and widespread unemployment caused by deficiency of effective demand.

Answer 1

The correct option is B A process of reversing inflation but without creating unemployment and reducing output.

Disinflation is a decrease in the rate of inflation or slowdown in the rate of increase of the general price level of goods and services in a nation. It is the opposite of inflation. However, if the inflation rate is not so high to start with disinflation can lead to deflation (decreases in general price level of goods and services).