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Questions and Answers
What is inflation?
What is inflation?
- A general increase in prices and fall in the purchasing value of money (correct)
- A decrease in prices and rise in the purchasing value of money
- A situation where prices remain stable over time
- An increase in the production of goods and services
What is one of the impacts of high inflation?
What is one of the impacts of high inflation?
- No impact on purchasing power
- Reduced purchasing power (correct)
- Stable purchasing power
- Increased purchasing power
What does deflation refer to?
What does deflation refer to?
- A general decrease in prices and increase in the purchasing value of money (correct)
- An increase in the production of goods and services
- A situation where prices remain stable over time
- An increase in prices and fall in the purchasing value of money
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Study Notes
Inflation and Deflation
- Inflation is a sustained increase in the general price level of goods and services in an economy over a period of time.
- High inflation can lead to a decrease in the purchasing power of consumers, as the same amount of money can buy fewer goods and services.
- Deflation refers to a sustained decrease in the general price level of goods and services in an economy over a period of time.
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