gs1medium
Which one of the following statements is an appropriate description of deflation?
- A.It is a sudden fall in the value of a currency against other currencies
- B.It is a persistent recession in both the financial and real sectors of economy
- C.It is a persistent fall in the general price level of goods and services
- D.It is a fall in the rate of inflation over a period of time
▶ Answer & Explanation
Correct answer: C. It is a persistent fall in the general price level of goods and services
Deflation refers to a sustained decrease in the general price level of goods and services in an economy. This means that money becomes more valuable over time, as the same amount of money can purchase more goods and services than before. It is distinct from disinflation, which is a slowdown in the rate of inflation, and a currency depreciation, which relates to exchange rates.
Source: UPSC gs1 2010