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3 September, 13:44

Which of the following is a problem with deflation?

A. There is no problem with deflation; falling prices are good for the economy.

B. Stopping it will cause a recession.

C. It raises the real cost of debt repayment.

D. It causes people to pay more taxes.

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Answers (1)
  1. 3 September, 17:10
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    Answer:C - It raisesthe real cost of debt repayment

    Explanation: Deflation is a persistent fall in general price level.

    When there's deflation, the interest rate rises and this increases the cost of debt repayment.

    Deflation is usually associated with a recessionary period where there is a negative GDP and high level of unemployment. Deflation isn't a postive occurrence.
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Home » Business » Which of the following is a problem with deflation? A. There is no problem with deflation; falling prices are good for the economy. B. Stopping it will cause a recession. C. It raises the real cost of debt repayment. D.
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