Inflation Primarily differs from deflation in that
1 Inflation tracks changing prices but deflation does not
2 inflation relates to rising rather than falling prices
3 Inflation happens only when the money supply is too small
4 inflation occurs much less often than deflation does ****
Where are all 10 questions for social studies quiz
I'd say 2.
inflation relates to rising rather than falling prices ?
yes number 2 is correct
The correct answer is 2 - inflation relates to rising rather than falling prices.
Inflation and deflation are both economic terms that describe the movement of prices. Inflation refers to a general increase in prices over time, which means that the purchasing power of money decreases. On the other hand, deflation refers to a general decrease in prices, resulting in an increase in the purchasing power of money.
To determine the correct answer, we need to understand the definitions of inflation and deflation and how they differ:
1. Inflation tracks changing prices but deflation does not: This statement is incorrect. Both inflation and deflation track changing prices. Inflation occurs when there is a sustained increase in the average level of prices over time, while deflation occurs when there is a sustained decrease in the average level of prices over time.
2. Inflation relates to rising rather than falling prices: This statement is correct. Inflation occurs when prices rise over time, meaning that the same amount of money will buy fewer goods and services. In contrast, deflation occurs when prices fall over time, resulting in an increase in the purchasing power of money.
3. Inflation happens only when the money supply is too small: This statement is incorrect. Inflation can occur due to various factors, such as increased demand, increased production costs, or changes in government policies. While an excessive increase in the money supply can contribute to inflation, it is not the only factor.
4. Inflation occurs much less often than deflation does: This statement is incorrect. Historically, deflation has been less common than inflation. Inflation is a more commonly observed phenomenon, especially in modern economies where central banks actively manage monetary policy to stabilize prices and promote economic growth.
Therefore, the correct answer is 2 - inflation relates to rising rather than falling prices.