Which one among the following is an appropriate description of ‘deflation?

Deflation is defined as a persistent or sustained decrease in the general price level of goods and services throughout an economy [2]. It occurs when the inflation rate becomes negative, effectively increasing the purchasing power of money [2]. This is distinct from 'disinflation', which refers to a slowing down in the rate of inflation where prices are still rising but at a slower pace [1]. While deflation is often associated with economic recessions, unemployment, and falling demand, the term itself specifically describes the price level movement rather than the state of the business cycle [2]. Option 1 describes currency depreciation or devaluation, and Option 4 describes disinflation [1]. Therefore, the most appropriate description of deflation is a persistent fall in the general price level [2].

Sources

1. [2] Indian Economy, Nitin Singhania .(ed 2nd 2021-22) > Chapter 4: Inflation > Deflation > p. 74
2. [1] Indian Economy, Vivek Singh (7th ed. 2023-24) > Chapter 2: Money and Banking- Part I > There are mainly two causes of inflation: > p. 113