Deflation rsquo in an economy would necessarily suggest decline in the Prices of all the goods GDP o...........

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Deflation’ in an economy would necessarily suggest decline in the

Prices of all the goods
GDP of the country

Which of the above is/are correct?

1 only

2 only

Both 1 and 2

None

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Explanation:

Statement 1: Deflation shows a general decline in prices of a selected basket of goods. It is not necessary that prices of all goods must have declined.

Statement 2: In economics, deflation is a decrease in the general price level of goods and services.

Deflation occurs when the inflation rate falls below 0% (a negative inflation rate). This should not be confused with disinflation, a slow-down in the inflation rate (i.e., when inflation declines to lower levels).

So, in a situation of deflation GDP may be growing, reducing or constant.