The correct answer is A. decreases.
Inflation is a general increase in prices and fall in the purchasing value of money. Deflation is a general decrease in prices and rise in the purchasing value of money.
When the rate of inflation decreases, it is called deflation. Deflation can be caused by a number of factors, including a decrease in the money supply, an increase in productivity, or a decrease in demand.
Deflation can have a number of negative effects on an economy, including:
- It can lead to a decrease in investment, as businesses are less likely to invest in new projects when they expect prices to fall.
- It can lead to a decrease in employment, as businesses are less likely to hire new workers when they expect prices to fall.
- It can lead to a decrease in consumer spending, as consumers are less likely to spend money when they expect prices to fall.
Deflation can also lead to a decrease in the value of assets, such as stocks and real estate. This can lead to a decrease in the wealth of individuals and businesses, which can further reduce spending and investment.
In conclusion, the rate of inflation decreases in the process of currency deflation.