During a period of the Great Recession, 10 percent of Americans were u

QUESTION

During a period of the Great Recession, 10 percent of Americans were unemployed and household wealth dropped significantly. Consequently, people stopped buying goods and began saving for an uncertain future.

Policymakers were fearful this would lead to what process?
A) hyperinflation
B) securitization
C) disinflation
D) deflation
E) inflation

ANSWER

Answer: D
Explanation: D) Under deflation, too few dollars are chasing too many goods. Prices drop. This can become a vicious cycle that curbs economic growth.