{"id":89192,"date":"2025-06-01T09:57:49","date_gmt":"2025-06-01T09:57:49","guid":{"rendered":"https:\/\/exam.pscnotes.com\/mcq\/?p=89192"},"modified":"2025-06-01T09:57:49","modified_gmt":"2025-06-01T09:57:49","slug":"consider-the-following-statements-1-when-the-inflation-decreases","status":"publish","type":"post","link":"https:\/\/exam.pscnotes.com\/mcq\/consider-the-following-statements-1-when-the-inflation-decreases\/","title":{"rendered":"Consider the following statements:\n  1. When the inflation decreases,"},"content":{"rendered":"<p>Consider the following statements:<\/p>\n<ul>\n<li>1. When the inflation decreases, but still remains positive, it is deflation.<\/li>\n<li>2. Deflation reduces the real value of money over time.<\/li>\n<li>3. Historically not all episodes of deflation correspond with periods of poor economic growth.<\/li>\n<\/ul>\n<p>Which of the statements given above is\/are correct ?<\/p>\n<p>[amp_mcq option1=&#8221;1, 2 and 3&#8243; option2=&#8221;1 and 3 only&#8221; option3=&#8221;3 only&#8221; option4=&#8221;2 only&#8221; correct=&#8221;option3&#8243;]<\/p>\n<div class=\"psc-box-pyq-exam-year-detail\">\n<div class=\"pyq-exam\">\n<div class=\"psc-heading\">This question was previously asked in<\/div>\n<div class=\"psc-title line-ellipsis\">UPSC CAPF &#8211; 2009<\/div>\n<\/div>\n<div class=\"pyq-exam-psc-buttons\"><a href=\"\/pyq\/pyq-upsc-capf-2009.pdf\" target=\"_blank\" class=\"psc-pdf-button\" rel=\"noopener\">Download PDF<\/a><a href=\"\/pyq-upsc-capf-2009\" target=\"_blank\" class=\"psc-attempt-button\" rel=\"noopener\">Attempt Online<\/a><\/div>\n<\/div>\n<section id=\"pyq-correct-answer\">\nThe correct option is C (3 only).<br \/>\n<\/section>\n<section id=\"pyq-key-points\">\n&#8211; Statement 1 is incorrect: Deflation is a decrease in the general price level of goods and services, meaning the inflation rate is negative. When inflation decreases but remains positive, it is called disinflation.<br \/>\n&#8211; Statement 2 is incorrect: Deflation increases the real value of money over time. If prices are falling, a fixed amount of money can buy more goods and services than before. Inflation, conversely, reduces the real value of money.<br \/>\n&#8211; Statement 3 is correct: While deflation is often associated with severe economic downturns (like the Great Depression), historical episodes exist where deflation occurred alongside economic growth, particularly during periods of significant productivity gains and technological advancements (e.g., late 19th century). This type of deflation, driven by falling production costs, can lead to lower prices for consumers without necessarily causing a recession.<br \/>\n<\/section>\n<section id=\"pyq-additional-information\">\nEconomists generally view deflation negatively in modern economies because falling prices can lead to decreased consumer spending (as people postpone purchases anticipating lower prices), reduced business profits, wage cuts, and an increased real burden of debt, potentially spiraling into a recession or depression.<br \/>\n<\/section>\n","protected":false},"excerpt":{"rendered":"<p>Consider the following statements: 1. When the inflation decreases, but still remains positive, it is deflation. 2. Deflation reduces the real value of money over time. 3. Historically not all episodes of deflation correspond with periods of poor economic growth. Which of the statements given above is\/are correct ? [amp_mcq option1=&#8221;1, 2 and 3&#8243; option2=&#8221;1 &#8230; <\/p>\n<p class=\"read-more-container\"><a title=\"Consider the following statements:\n  1. When the inflation decreases,\" class=\"read-more button\" href=\"https:\/\/exam.pscnotes.com\/mcq\/consider-the-following-statements-1-when-the-inflation-decreases\/#more-89192\">Detailed Solution<span class=\"screen-reader-text\">Consider the following statements:<br \/>\n  1. When the inflation decreases,<\/span><\/a><\/p>\n","protected":false},"author":1,"featured_media":0,"comment_status":"closed","ping_status":"open","sticky":false,"template":"","format":"standard","meta":{"footnotes":""},"categories":[1085],"tags":[1462,1120,1190],"class_list":["post-89192","post","type-post","status-publish","format-standard","hentry","category-upsc-capf","tag-1462","tag-economic-development","tag-money-banking","no-featured-image-padding"],"yoast_head":"<!-- This site is optimized with the Yoast SEO Premium plugin v22.2 (Yoast SEO v23.3) - https:\/\/yoast.com\/wordpress\/plugins\/seo\/ -->\n<title>Consider the following statements:  1. When the inflation decreases,<\/title>\n<meta name=\"description\" content=\"The correct option is C (3 only). - Statement 1 is incorrect: Deflation is a decrease in the general price level of goods and services, meaning the inflation rate is negative. When inflation decreases but remains positive, it is called disinflation. - Statement 2 is incorrect: Deflation increases the real value of money over time. If prices are falling, a fixed amount of money can buy more goods and services than before. Inflation, conversely, reduces the real value of money. - Statement 3 is correct: While deflation is often associated with severe economic downturns (like the Great Depression), historical episodes exist where deflation occurred alongside economic growth, particularly during periods of significant productivity gains and technological advancements (e.g., late 19th century). This type of deflation, driven by falling production costs, can lead to lower prices for consumers without necessarily causing a recession.\" \/>\n<meta name=\"robots\" content=\"index, follow, max-snippet:-1, max-image-preview:large, max-video-preview:-1\" \/>\n<link rel=\"canonical\" href=\"https:\/\/exam.pscnotes.com\/mcq\/consider-the-following-statements-1-when-the-inflation-decreases\/\" \/>\n<meta property=\"og:locale\" content=\"en_US\" \/>\n<meta property=\"og:type\" content=\"article\" \/>\n<meta property=\"og:title\" content=\"Consider the following statements:  1. When the inflation decreases,\" \/>\n<meta property=\"og:description\" content=\"The correct option is C (3 only). - Statement 1 is incorrect: Deflation is a decrease in the general price level of goods and services, meaning the inflation rate is negative. When inflation decreases but remains positive, it is called disinflation. - Statement 2 is incorrect: Deflation increases the real value of money over time. If prices are falling, a fixed amount of money can buy more goods and services than before. Inflation, conversely, reduces the real value of money. - Statement 3 is correct: While deflation is often associated with severe economic downturns (like the Great Depression), historical episodes exist where deflation occurred alongside economic growth, particularly during periods of significant productivity gains and technological advancements (e.g., late 19th century). This type of deflation, driven by falling production costs, can lead to lower prices for consumers without necessarily causing a recession.\" \/>\n<meta property=\"og:url\" content=\"https:\/\/exam.pscnotes.com\/mcq\/consider-the-following-statements-1-when-the-inflation-decreases\/\" \/>\n<meta property=\"og:site_name\" content=\"MCQ and Quiz for Exams\" \/>\n<meta property=\"article:published_time\" content=\"2025-06-01T09:57:49+00:00\" \/>\n<meta name=\"author\" content=\"rawan239\" \/>\n<meta name=\"twitter:card\" content=\"summary_large_image\" \/>\n<meta name=\"twitter:label1\" content=\"Written by\" \/>\n\t<meta name=\"twitter:data1\" content=\"rawan239\" \/>\n\t<meta name=\"twitter:label2\" content=\"Est. reading time\" \/>\n\t<meta name=\"twitter:data2\" content=\"1 minute\" \/>\n<!-- \/ Yoast SEO Premium plugin. -->","yoast_head_json":{"title":"Consider the following statements:  1. When the inflation decreases,","description":"The correct option is C (3 only). - Statement 1 is incorrect: Deflation is a decrease in the general price level of goods and services, meaning the inflation rate is negative. When inflation decreases but remains positive, it is called disinflation. - Statement 2 is incorrect: Deflation increases the real value of money over time. If prices are falling, a fixed amount of money can buy more goods and services than before. Inflation, conversely, reduces the real value of money. - Statement 3 is correct: While deflation is often associated with severe economic downturns (like the Great Depression), historical episodes exist where deflation occurred alongside economic growth, particularly during periods of significant productivity gains and technological advancements (e.g., late 19th century). This type of deflation, driven by falling production costs, can lead to lower prices for consumers without necessarily causing a recession.","robots":{"index":"index","follow":"follow","max-snippet":"max-snippet:-1","max-image-preview":"max-image-preview:large","max-video-preview":"max-video-preview:-1"},"canonical":"https:\/\/exam.pscnotes.com\/mcq\/consider-the-following-statements-1-when-the-inflation-decreases\/","og_locale":"en_US","og_type":"article","og_title":"Consider the following statements:  1. When the inflation decreases,","og_description":"The correct option is C (3 only). - Statement 1 is incorrect: Deflation is a decrease in the general price level of goods and services, meaning the inflation rate is negative. When inflation decreases but remains positive, it is called disinflation. - Statement 2 is incorrect: Deflation increases the real value of money over time. If prices are falling, a fixed amount of money can buy more goods and services than before. Inflation, conversely, reduces the real value of money. - Statement 3 is correct: While deflation is often associated with severe economic downturns (like the Great Depression), historical episodes exist where deflation occurred alongside economic growth, particularly during periods of significant productivity gains and technological advancements (e.g., late 19th century). This type of deflation, driven by falling production costs, can lead to lower prices for consumers without necessarily causing a recession.","og_url":"https:\/\/exam.pscnotes.com\/mcq\/consider-the-following-statements-1-when-the-inflation-decreases\/","og_site_name":"MCQ and Quiz for Exams","article_published_time":"2025-06-01T09:57:49+00:00","author":"rawan239","twitter_card":"summary_large_image","twitter_misc":{"Written by":"rawan239","Est. reading time":"1 minute"},"schema":{"@context":"https:\/\/schema.org","@graph":[{"@type":"WebPage","@id":"https:\/\/exam.pscnotes.com\/mcq\/consider-the-following-statements-1-when-the-inflation-decreases\/","url":"https:\/\/exam.pscnotes.com\/mcq\/consider-the-following-statements-1-when-the-inflation-decreases\/","name":"Consider the following statements: 1. When the inflation decreases,","isPartOf":{"@id":"https:\/\/exam.pscnotes.com\/mcq\/#website"},"datePublished":"2025-06-01T09:57:49+00:00","dateModified":"2025-06-01T09:57:49+00:00","author":{"@id":"https:\/\/exam.pscnotes.com\/mcq\/#\/schema\/person\/5807dafeb27d2ec82344d6cbd6c3d209"},"description":"The correct option is C (3 only). - Statement 1 is incorrect: Deflation is a decrease in the general price level of goods and services, meaning the inflation rate is negative. When inflation decreases but remains positive, it is called disinflation. - Statement 2 is incorrect: Deflation increases the real value of money over time. If prices are falling, a fixed amount of money can buy more goods and services than before. Inflation, conversely, reduces the real value of money. - Statement 3 is correct: While deflation is often associated with severe economic downturns (like the Great Depression), historical episodes exist where deflation occurred alongside economic growth, particularly during periods of significant productivity gains and technological advancements (e.g., late 19th century). This type of deflation, driven by falling production costs, can lead to lower prices for consumers without necessarily causing a recession.","breadcrumb":{"@id":"https:\/\/exam.pscnotes.com\/mcq\/consider-the-following-statements-1-when-the-inflation-decreases\/#breadcrumb"},"inLanguage":"en-US","potentialAction":[{"@type":"ReadAction","target":["https:\/\/exam.pscnotes.com\/mcq\/consider-the-following-statements-1-when-the-inflation-decreases\/"]}]},{"@type":"BreadcrumbList","@id":"https:\/\/exam.pscnotes.com\/mcq\/consider-the-following-statements-1-when-the-inflation-decreases\/#breadcrumb","itemListElement":[{"@type":"ListItem","position":1,"name":"Home","item":"https:\/\/exam.pscnotes.com\/mcq\/"},{"@type":"ListItem","position":2,"name":"UPSC CAPF","item":"https:\/\/exam.pscnotes.com\/mcq\/category\/upsc-capf\/"},{"@type":"ListItem","position":3,"name":"Consider the following statements: 1. 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