boom
inflation
deflation
recession
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Discussions (4)
My school,dis answer is a little bit trickish to me .if inflation is a persistent rise in general level of price which in turn makes the purchasing power to fall and deflation says is the opposite of inflation that is fall in the general level of price,then how come our answer should be deflation, since the question is a decrease in aggregate spending.to me it's should b inflation since there is a persistent rise in general level of price =fall in the purchasing power
Deflation can b cause by a combination of different factors including having a shortage of money in circulation, which increase the value of that money and in turn, reduces prices, having more goods to produce than there is demand for which means businesses must decrease their prices to get pple to buy the goods
The answer cant be inflation,people spend money at a very fast rate in an inflation due to the persistent rise in the prices of goods(the current state of the country
),leading to a forced increase in aggregate spending but a decrease in aggregate spending can be a cause of deflation as it signifies a withdrawal from the circular flow(simply meaning a reduction in the volume of money in circulation).So the correct ans is C deflation
