How might deflation set off further deflation? O If prices are falling in the economy, this will cause a decrease in the number of goods exported from the country and thus cause prices to fall further. O Falling prices cause firms to increase production, and the increase in supply causes prices to fall further. O Falling prices may cause people to defer spending in expectation of further lower prices, and this leads to more deflation. O Falling prices can increase the nominal interest rates in the economy and reduce consumption.

How might deflation set off further deflation? O If prices are falling in the economy, this will cause a decrease in the number of goods exported from the country and thus cause prices to fall further. O Falling prices cause firms to increase production, and the increase in supply causes prices to fall further. O Falling prices may cause people to defer spending in expectation of further lower prices, and this leads to more deflation. O Falling prices can increase the nominal interest rates in the economy and reduce consumption.

ENGR.ECONOMIC ANALYSIS

14th Edition

ISBN:9780190931919

Author:NEWNAN

Publisher:NEWNAN

Chapter1: Making Economics Decisions

Section: Chapter Questions

Problem 1QTC

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