Deflation Defined as Falling Price Levels

Steps:

• Recall that deflation is the opposite of inflation in economic terms.
• Inflation measures rising average prices; deflation measures their decline.
• Identify the core indicator: changes in the general price level.
• Match the definition to the options to find the precise description.

Why A is correct:

• Deflation is defined as a sustained decrease in the general price level, directly matching the falling average price level.

Why the others are wrong:

• B: Output falling indicates recession, not required for deflation.
• C: Falling inflation rate means disinflation; deflation requires negative inflation.
• D: Real value of money rises during deflation as purchasing power increases.

Final answer: A