Multiple choice

The transfer payments should be increased by the government at the time of

  1. deflation

  2. inflation

  3. boom

  4. none of these
Reveal answer Fill a bubble to check yourself
A Correct answer
Explanation

It is deflation. At the time of deflation, purchasing power of people is reduced. Hence, at that time the supply of money in the hands of public must be increased like increase in old age pension, increase in unemployment compensation etc. Thus, people will demand more as money supply increases. This will boost the economy.

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