When the general price level persistently falls, the rate of unemployment

Assessment: WAEC SSCE - Economics - 2004 (Objective) Subject: Economics

Question 1 Report

When the general price level persistently falls, the rate of unemployment
Answer Details
When the general price level persistently falls, it causes a situation known as deflation. In such a situation, people's purchasing power increases, and they can buy more goods and services with the same amount of money. As a result, the demand for goods and services decreases, which can cause businesses to reduce their production and, in turn, decrease employment opportunities. Therefore, the rate of unemployment tends to rise when the general price level persistently falls.
Read lesson note on Money And Inflation (WAEC)
Read lesson note on Financial Institutions (WAEC)
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