A columnist writing in the Wall Street Journal observed: "Franklin D. Roosevelt's March 1933 inaugural line that the only thing we have to fear is fear itself was inspiring, but wrong. There was plenty to fear, not least the deflation that then gripped the nation." Prices fall when a country experiences deflation, so isn't deflation good for consumers? A. No, borrowers would be hurt by the higher real interest rates and higher real value of debts that deflation causes. OB. Yes, deflation decreases prices, so when prices are falling, the purchasing power of money increases. OC. Yes, allowing the price level to fall is necessary before an economic recovery can begin. OD. It depends. The lower price level is always good for consumers as long as it doesn't lead to bank runs.
A columnist writing in the Wall Street Journal observed: "Franklin D. Roosevelt's March 1933 inaugural line that the only thing we have to fear is fear itself was inspiring, but wrong. There was plenty to fear, not least the deflation that then gripped the nation." Prices fall when a country experiences deflation, so isn't deflation good for consumers? A. No, borrowers would be hurt by the higher real interest rates and higher real value of debts that deflation causes. OB. Yes, deflation decreases prices, so when prices are falling, the purchasing power of money increases. OC. Yes, allowing the price level to fall is necessary before an economic recovery can begin. OD. It depends. The lower price level is always good for consumers as long as it doesn't lead to bank runs.
Chapter6: How Statisticians Measure Inflation
Section6.A: How Statisticians Measure Inflation
Problem 6TY
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![A columnist writing in the Wall Street Journal observed: "Franklin D. Roosevelt's March 1933 inaugural line that the only thing we have to fear fear itself was inspiring, but wrong. There was plenty to fear,
not least the deflation that then gripped the nation."
Prices fall when country experiences deflation, so isn't deflation good for consumers?
A. No, borrowers would be hurt by the higher real interest rates and higher real value of debts that deflation causes.
O B. Yes, deflation decreases prices, so when prices are falling, the purchasing power of money increases.
O C. Yes, allowing the price level to fall is necessary before an economic recovery can begin.
OD. It depends. The lower price level is always good for consumers as long as it doesn't lead to bank runs.](/v2/_next/image?url=https%3A%2F%2Fcontent.bartleby.com%2Fqna-images%2Fquestion%2Fc03742c3-ff10-46b3-b360-b6376c278cc4%2Fae4c686a-1470-412d-98a1-731c1efa4cfd%2Fe4mzn2g_processed.jpeg&w=3840&q=75)
Transcribed Image Text:A columnist writing in the Wall Street Journal observed: "Franklin D. Roosevelt's March 1933 inaugural line that the only thing we have to fear fear itself was inspiring, but wrong. There was plenty to fear,
not least the deflation that then gripped the nation."
Prices fall when country experiences deflation, so isn't deflation good for consumers?
A. No, borrowers would be hurt by the higher real interest rates and higher real value of debts that deflation causes.
O B. Yes, deflation decreases prices, so when prices are falling, the purchasing power of money increases.
O C. Yes, allowing the price level to fall is necessary before an economic recovery can begin.
OD. It depends. The lower price level is always good for consumers as long as it doesn't lead to bank runs.
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