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    Question

    Which of the following is NOT correct about inflation?

    i. Negative inflation (deflation) is more harmful than moderate inflation ii. Inflation can boost growth iii. High inflation increases money supply in the market and therefore boost the economy iv. High inflation creates economic inequalities
    A Only i Correct Answer Incorrect Answer
    B Only ii Correct Answer Incorrect Answer
    C Only iii Correct Answer Incorrect Answer
    D Only iv Correct Answer Incorrect Answer
    E All the above are correct Correct Answer Incorrect Answer

    Solution

    In case of deflation, when prices are falling people are reluctant to spend because they are concerned that prices will be cheaper in the future, therefore, they keep delaying purchases. High inflation hampers economic growth due to increase in the cost of production.

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