Delfation Flashcards
1
Q
Deflation
A
The persistent fall in the GPL of G/S, the rate of inflation becomes negative
2
Q
Malevolent (bad) deflation
A
Caused by falling AD
3
Q
Benign (good) deflation
A
Improvements in productivity
4
Q
Negative consequences of deflation (2)
A
• Consumption postponement
• Positive IR: burden on borrowers
5
Q
Positive consequences of deflation (2)
A
• Real incomes rise
• International competitiveness: fall in PL of exports
