Question

Deflation:______.

a. might easily make both producers and consumers better off because consumers might lose jobs due to falling prices and profit margins, and the falling profit margins would negatively impact producers.
b. might easily make both producers and consumers better off because consumers might lose jobs due to falling prices and profit margins, and the falling profit margins would negatively impact producers. automatically implies that, on average, everyone is better off because prices have fallen.
c. automatically implies that, on average, everyone is better off because prices have fallen.
d. might make you better off if your nominal wages fall more rapidly than prices.

Answer 1

Answer: e. would negatively affect producers but positively affect consumers because producers must accept lower prices.

Step-by-step explanation:

Deflation is the opposite of inflation and as such refers to a sustained decrease in prices of goods and services in a country over a period.

As prices are decreasing, producers will have no choice but to decrease their prices as well due to lower input costs as well as to remain competitive. This will benefit consumers who would then be able to buy goods and services at a lower rate.