Which one of the following statements is an appropriate description of deflation?
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
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(c) Deflation is a decrease in the prices of goods and services. It occurs when the annual inflation rate falls below 0% which is a negative inflation rate. This is different from Disinflation which is a slow-down in the inflation rate. This is a situation when inflation declines to lower levels but prices continue to rise.
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