[Solved] What is a likely economic consequence of deflation? — Ans: Reduced consumer spending leading to economic slowdown | Economic Awareness

Economic Awareness - Sectors of Indian Economy

What is a likely economic consequence of deflation?

AIncreased consumer spending due to lower prices

BStable prices encouraging investment

CRapid economic growth due to higher demand

DReduced consumer spending leading to economic slowdown

Step-by-Step Solution

Step 1: Understand economic impact of deflation
Deflation causes prices to fall, which can reduce consumer spending as people delay purchases expecting lower prices.
Step 2: Analyze options
Reduced consumer spending leads to economic slowdown, making option stating this the correct consequence.
Final Answer:
Reduced consumer spending leading to economic slowdown → Option D
Quick Check:
Deflation impact = reduced spending and slowdown ✅

Quick Trick: Deflation discourages spending, hurting growth.

Common Mistakes:

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