Deflation occurs when the
Multiple Choice
price of large ticket items, such as appliances, decreases.
economy reaches full employment.
average price of goods and services does not change.
price decreases for some goods and services outweigh price increases on all other goods and services.
price decreases for some goods and services outweigh price increases on all other goods and services.
Deflation occurs when the:
- price decreases for some goods and services outweigh price increases on all other goods and services.
The correct answer is: price decreases for some goods and services outweigh price increases on all other goods and services.
Deflation occurs when the overall level of prices in an economy decreases over a sustained period of time. This means that the average price of goods and services declines. The opposite of deflation is inflation, which is an increase in the average price of goods and services.
To answer this multiple-choice question, you need to determine which option explains deflation accurately. Let's go through each option:
A. Price of large ticket items, such as appliances, decreases: This option does not capture the concept of deflation accurately. Deflation is not limited to specific items or categories of goods; it refers to a general decrease in prices across the economy.
B. Economy reaches full employment: Full employment is a condition where all available labor resources are being utilized, but it is not directly related to deflation. The level of employment in an economy does not determine whether deflation occurs or not.
C. Average price of goods and services does not change: This option contradicts the definition of deflation. Deflation specifically indicates a decrease in the average price level of goods and services, not a situation where the average price remains unchanged.
D. Price decreases for some goods and services outweigh price increases on all other goods and services: This option accurately describes deflation. Deflation occurs when price decreases for certain goods and services are significant enough to outweigh price increases in other categories, resulting in an overall decline in the average price level.
Therefore, the correct answer is D: price decreases for some goods and services outweigh price increases on all other goods and services.