Which event indicates that deflation is occurring
There are several possible indicators that suggest deflation is occurring, including:
1. Falling prices: One of the most obvious indicators of deflation is when prices across a wide range of goods and services start to decline.
2. Decreasing money supply: Deflation can be caused by a decrease in the money supply, which makes it more difficult for businesses and consumers to access credit and funds.
3. Decreasing employment: As prices fall, companies may struggle to maintain profit margins, and may cut back on hiring or lay off workers, which can lead to increased unemployment.
4. Lower consumer demand: If consumers become more cautious about spending because of economic uncertainty, this may lead to a decline in demand for goods and services, which can result in deflation.
5. Reduced investment: As prices fall, investors may become more hesitant to invest in businesses, which can further decrease economic activity and contribute to deflation.