| Consider the following statements |
| 1. In the disinflation the prices are still rising but at a lower rate. |
| 2. Deflation results into a sustained increase in the real value of money and other monetary items. Which of the statements given above is/are correct? |
A) Only 1
B) Only 2
C) Both 1 and 2
D) neither 1 nor 2
Correct Answer: C
Solution :
When the price level rises, each unit of currency buys fewer goods and services. Consequently, inflation reflects a reduction in the purchasing power per unit of money - a loss of real value in the medium of exchange and unit of account within the economy. Deflation works on the opposite.
You need to login to perform this action.
You will be redirected in
3 sec
