Deflation is generally considered by economists to be a positive economic situation because it creates strong job growth.

True / False.

The correct answer is False.

Explanation:

The disadvantages of deflation are basically the reduction of economic activity, the increase in unemployment, the increase in economic uncertainty, the increase in real interest rates due to falling prices, falling demand.

The danger of this situation comes from how difficult it is to get out of it, since a vicious circle is created by which when demand falls, companies are reduced their profits by having to reduce prices to get sales, as a result, they have to reduce costs, which means they have to cut jobs. In turn, if there are people who run out of work, demand will continue to decrease as they will stop buying as well.