Deflation can be caused by which of the following?

• A. (i) only
• B. (iii) only
• C. (i) and (ii) only
• D. (ii) and (iii) only

Answer: (D)

Deflation is a sustained, broad fall in the general price level across the economy. It typically arises when overall demand weakens or when money and credit conditions tighten, reducing spending and putting downward pressure on prices. If one statement describes a drop in aggregate demand and another describes tighter monetary or credit conditions, together they create the kind of widespread price declines that define deflation. A statement that points to a change affecting only a single good or a one-off factor that doesn’t push prices down across many sectors wouldn’t by itself cause deflation. So the combination that reflects weaker demand and tighter money/credit aligns with a deflationary scenario, making that choice the best fit.