A columnist writing in the Wall Street Journal observed: "Franklin D. Roosevelt's March 1933 inaugural line that the only thing we have to fear is fear itself was inspiring, but wrong. There was plenty to fear, not least the deflation that then gripped the nation." Prices fall when a country experiences deflation, so isn't deflation good for consumers? A. No, borrowers would be hurt by the higher real interest rates and higher real value of debts that deflation causes. OB. Yes, deflation decreases prices, so when prices are falling, the purchasing power of money increases. OC. Yes, allowing the price level to fall is necessary before an economic recovery can begin. OD. It depends. The lower price level is always good for consumers as long as it doesn't lead to bank runs.
A columnist writing in the Wall Street Journal observed: "Franklin D. Roosevelt's March 1933 inaugural line that the only thing we have to fear is fear itself was inspiring, but wrong. There was plenty to fear, not least the deflation that then gripped the nation." Prices fall when a country experiences deflation, so isn't deflation good for consumers? A. No, borrowers would be hurt by the higher real interest rates and higher real value of debts that deflation causes. OB. Yes, deflation decreases prices, so when prices are falling, the purchasing power of money increases. OC. Yes, allowing the price level to fall is necessary before an economic recovery can begin. OD. It depends. The lower price level is always good for consumers as long as it doesn't lead to bank runs.
Chapter6: How Statisticians Measure Inflation
Section6.A: How Statisticians Measure Inflation
Problem 6TY
Related questions
Question
Expert Solution
This question has been solved!
Explore an expertly crafted, step-by-step solution for a thorough understanding of key concepts.
Step by step
Solved in 3 steps
Knowledge Booster
Learn more about
Need a deep-dive on the concept behind this application? Look no further. Learn more about this topic, economics and related others by exploring similar questions and additional content below.Recommended textbooks for you
Macroeconomics: Principles and Policy (MindTap Co…
Economics
ISBN:
9781305280601
Author:
William J. Baumol, Alan S. Blinder
Publisher:
Cengage Learning
Macroeconomics: Principles and Policy (MindTap Co…
Economics
ISBN:
9781305280601
Author:
William J. Baumol, Alan S. Blinder
Publisher:
Cengage Learning
Economics (MindTap Course List)
Economics
ISBN:
9781337617383
Author:
Roger A. Arnold
Publisher:
Cengage Learning
Economics Today and Tomorrow, Student Edition
Economics
ISBN:
9780078747663
Author:
McGraw-Hill
Publisher:
Glencoe/McGraw-Hill School Pub Co