Question on: JAMB Economics - 2024
The main disadvantages of deflationary policies is
A
full employment in the country
B
increasing cost of living
C
unemployment in the country
D
improved standard of living
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Correct Option: C
Deflationary policies aim to reduce the overall price level in an economy. Main disadvantages include:
- Increased unemployment: Measures like raising interest rates or reducing government spending can decrease production and investment, causing job losses.
- Reduced economic growth: Lower demand and prices can lead businesses to cut production, slowing economic growth.
- Debt burden: Deflation increases the real value of debt, making repayment harder for borrowers.
- Discourages spending and investment: Consumers and businesses may postpone spending, expecting further price declines, worsening the deflationary spiral.
Option C is the most appropriate answer as deflationary policies can lead to unemployment.
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