What term describes the decrease in the money supply caused by a drop in prices?

Multiple choice question for Basic of Economics. Select an option, then review the explanation below.

Explanation

Deflation refers to the reduction in the amount of money circulating in the economy due to falling prices. Inflation is the opposite, representing a rise in prices. Cost efficiency and expense are unrelated economic terms.

Practice related questions from the same subject.

1.Which of the following best describes deflation?
2.Under what condition can two nations benefit from engaging in international trade?
3.Which of the following represents a legitimate form of currency?
4.Which political ideology is best summarized by the phrase, "From each according to his ability, to each according to his needs"?
5.Which type of currency experiences a decline in its exchange rate due to a continuous balance of payments deficit?

What term describes the decrease in the money supply caused by a drop in prices?

Explanation

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