Which of the following statements is TRUE about disinflation?
A. Disinflation means prices are falling rapidly
B. Disinflation is always harmful to the economy
C. Disinflation is a slowing down of inflation
D. Disinflation only happens during economic booms
Answer (1)
The correct answer is letter C. Disinflation is a slowing down of inflationDisinflation means that prices are still rising, but at a slower rate than before. For example, if inflation was 6% last year and drops to 3% this year, that’s disinflation. Prices haven’t fallen, but they’re not increasing as quickly as before.Disinflation is generally seen as a good sign—it shows that the economy is stabilizing and that the central bank’s measures (like raising interest rates) may be working. In the Philippines, disinflation can occur when oil prices stabilize after a surge, or when the government effectively manages food supply. Unlike deflation (where prices actually fall), disinflation allows businesses and consumers to adjust gradually, which is healthier for the economy.
