Question

Deflation:

a. might easily make both producers and consumers better off because consumers might lose jobs due to falling prices and profit margins, and the falling profit margins would negatively impact producers.

b. might make you better off if your nominal wages fall more rapidly than prices.

c. automatically occurs when there are more goods with falling prices than there are goods with increasing prices.

d. would negatively affect producers but positively affect consumers because producers must accept lower prices.

e. automatically implies that, on average, everyone is better off because prices have fallen.

Answer 1

Deflation implies the fall in general price level in an economy.

It automatically occurs when there are more goods with falling prices than there are goods with increasing price.

So, the correct answer is an option (c).