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Which of the following statements about deflation and disinflation is INCORRECT?

hard Q9 of 15
Economic Awareness - Sectors of Indian Economy
Which of the following statements about deflation and disinflation is INCORRECT?
ADisinflation indicates a reduction in inflation rate but prices still rise
BDeflation always leads to economic growth due to lower prices
CDeflation can cause a deflationary spiral harming the economy
DDisinflation is a sign of controlled inflation
Step-by-Step Solution

  1. Step 1: Understand economic effects

    Deflation generally harms the economy by reducing demand, not promoting growth.

  2. Step 2: Analyze options

    Option stating deflation always leads to growth is incorrect; others correctly describe deflation and disinflation.

  3. Final Answer:

    Deflation always leads to economic growth due to lower prices → Option B

  4. Quick Check:

    Deflation does NOT always lead to economic growth ✅
Quick Trick: Deflation usually slows growth, not accelerates it.
Common Mistakes:
  • Assuming lower prices always boost economic growth.
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