A decrease in aggregate spending in an economy will ultimately lead to?

A. boom
B. inflation
C. deflation
D. recession

Correct Answer:

Option C – deflation

Explanation

A small downturn in consumer spending damages the economy. As it drops off, economic growth slows. Prices drop, creating deflation. If slow consumer spending continues, the economy contracts.

Deflation is the opposite of inflation. It means reduction or a fall in the general level of prices in an economy.