UPSC CSE Prelims 2010
Deflation refers to a persistent or sustained fall in the general price level of goods and services within an economy. This leads to a negative inflation rate and is often indicative of weak aggregate demand, economic contraction, or an excess supply of goods relative to demand.
Option (a): A sudden fall in the value of a currency against other currencies describes currency depreciation or devaluation, not deflation. Deflation relates to the internal purchasing power of a currency in terms of goods and services.
Option (b): A persistent recession in both the financial and real sectors of the economy describes a prolonged economic downturn. While deflation can occur during a recession, recession itself is a decline in economic activity, not a fall in the general price level.
Option (d): A fall in the rate of inflation over a period of time is known as disinflation. Disinflation means that prices are still rising, but at a slower rate, whereas deflation signifies an actual decrease in the general price level.