Labor — Unit test

Question 14 • IL-Economics

What is the difference between inflation and deflation?

Answer

Inflation can result from falling demand and boosts the value of money. Deflation can result from rising demand and reduces the value of money.

Inflation can result from rising demand and boosts the value of money. Deflation can result from falling demand and reduces the value of money.

Inflation can result from falling demand and reduces the value of money. Deflation can result from rising demand and boosts the value of money.

Inflation can result from rising demand and reduces the value of money. Deflation can result from falling demand and boosts the value of money.

Explanation

Inflation is a general rise in prices, which reduces the amount of goods and services money can buy. It can result when rising demand puts pressure on prices. Deflation is a general fall in prices, which increases money’s purchasing power, and it can result from falling demand. Therefore, choice D correctly describes both.

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