The US For diagram D the economy best represents the effects of a decrease in the price of imported resources.
To wait for cheaper prices in the future, people postpone purchases when prices fall. This will lead to a decrease in economic growth, a decrease in producer income, and a decrease in economic activity.
Economists fear deflation because it reduces consumer spending, a key driver of economic development. Companies are slowing production in response to falling prices, leading to layoffs and pay cuts. As a result, demand and prices continue to fall.
Prices and earnings rise during a period of persistent high inflation, and cash and fixed-income assets may experience a loss in buying power as a result of the returns not keeping pace with inflation. Prices, employment, and salaries all could decrease during deflations.
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