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most developing countries such as South Africa, Zambia, Tanzania, Mozambique, Nigeria etc, are battling to contain inflation...

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Economics

most developing countries such as South Africa,Zambia, Tanzania, Mozambique, Nigeria etc, are battling to containinflation at a desirable levels. on the other hand, some developedeconomies are battling with deflation. using relevant macroeconomictheories to support your arguments:

a) write a detailed review of the challenges posed bydeflation within an economy. your answer should cover all sectorsincluding the business, government and the society as well as othermacroeconomic indicators ( GDP, unemployment, interest rate etc.) (25 marks)

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3.9 Ratings (434 Votes)
A A deflation is a phenomenon where the price level decreases It means that deflation is negative of inflation As a result the deflation causes purchasing power of money to increase Hence real value of money increases due to this reason deflation poses different challenges The first challenge is that deflation and the resulting increase in real value of money causes people to spend less and save more It reduces the AD in the economy and AD curve shifts to the    See Answer
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