WHAT CAUSES DEFLATION?

How can changes in currency value, such as a strengthening currency, impact import prices and domestic prices?

• Increase import prices and domestic prices

• Lead to higher import prices and lower domestic prices

• Lead to lower import prices and domestic price reductions

• Have no effect on import prices and domestic prices

What can cause deflation according to the passage?

• Increase in consumer spending

• Decrease in consumer spending

• Rise in prices

• Expansion of the money supply

How do government policies like austerity measures and regulations restricting price increases contribute to deflation?

• By increasing consumer spending

• By decreasing the money supply

• By encouraging businesses to raise prices

• By promoting economic growth

How do factors like decreased consumer spending, government policies, and currency value changes influence deflation?

Understanding these factors is crucial in addressing and mitigating the impact of deflation on the economy. What is the impact of deflation on the economy?