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Price Stability Overview

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Questions and Answers

What is meant by price stability in an economy?

There is a continuous decline in prices.

Prices frequently increase and decrease.

Prices are subject to extreme fluctuations.

The general price level remains largely unchanged over time. (correct)

Which of the following best describes a consequence of price stability?

Increased economic uncertainty.

Frequent changes in interest rates.

A higher tendency for market speculation.

Predictable economic planning for consumers and businesses. (correct)

Which of the following scenarios represents a lack of price stability?

A consistent annual inflation rate of 2%.

Significant inflation leading to rapidly increasing prices. (correct)

Mild deflation observed for a short period.

Prices of goods remain constant for several years.

Why is price stability important for an economy?

<p>It helps maintain consumer confidence.</p> Signup and view all the answers

What does price stability imply about inflation and deflation in an economy?

<p>There is minimal or no significant inflation or deflation.</p> Signup and view all the answers

Study Notes

Price Stability

Refers to minimal fluctuations in the general price level within an economy.
Characterized by the absence of significant inflation (rising prices) or deflation (falling prices).
Ensures predictability for consumers and businesses when making financial decisions.
contributes to sustainable economic growth and avoids market volatility.
Facilitates long-term contracts and investments, benefiting overall economic stability.

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Description

This quiz explores the concept of price stability in an economy. It highlights the importance of minimal price fluctuations, the roles of inflation and deflation, and how price stability contributes to sustainable economic growth. Understand the implications for consumers, businesses, and overall market predictability.