Multiple Choice
Increased spending on which of the following contributes most to long-term economic growth?
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1. Introduction to Macroeconomics
Introduction to Economics
Multiple Choice
Deflation occurs when there is a decline in which of the following?
A
the gross domestic product (GDP)
B
the general price level of goods and services
C
the unemployment rate
D
the supply of money
Verified step by step guidance1
Step 1: Understand the definition of deflation. Deflation refers to a decrease in the general price level of goods and services in an economy over a period of time.
Step 2: Recognize that deflation is not directly about the total output (GDP), unemployment rate, or money supply, although these can be related to economic conditions.
Step 3: Recall that the general price level is often measured by price indices such as the Consumer Price Index (CPI) or the GDP deflator, which track average prices across a basket of goods and services.
Step 4: Identify that a decline in the general price level means that, on average, prices are falling, which is the hallmark of deflation.
Step 5: Conclude that deflation specifically occurs when there is a decline in the general price level of goods and services, not necessarily in GDP, unemployment, or money supply.
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