Your senators now claim that lowering prices would be good for everyone—“Who doe
ID: 1111987 • Letter: Y
Question
Your senators now claim that lowering prices would be good for everyone—“Who doesn’t like lower prices, after all?” They tell you that they plan to lobby for deflation. Falling prices could lead to a bad situation because:
A) deflation increases consumption because people like falling prices. B) it makes debt harder to pay back because loans are made in nominal terms, and less borrowing means less spending. C) people will expect prices to start rising and will want to spend more before they do. D) deflation decreases the value of savings in real terms.Explanation / Answer
B) it makes debt harder to pay back because loans are made in nominal terms, and less borrowing means less spending.
the above is the answer and also explains the answer itself.
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