Multiple choice

The cause of deflation is

  1. lack of goods and services as compared to money supply

  2. lack of imports as compared to exports

  3. lack of money supply as compared to supply of goods and services

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

Deflation occurs when the money supply grows more slowly than the supply of goods and services, creating a situation where there is 'too little money chasing too many goods.' This imbalance causes prices to fall as consumers have less purchasing power. The correct answer is option C - lack of money supply compared to supply of goods and services.

Keep practicing — related questions