Saturday 24 October 2009

Why Don't Prices Decline During A Recession?

According to my idea, it's because the demand is more than the supply. People wanting more, and not getting that. So the decline in supply causes the prices to rise. But if prices rise, it causes people to save more. So the savings are gonna be more. This leads to the shortage of income. Prices won't decline during recession because money supply is less. If the prices will decline money supply will be more less than before, because demand is much more then the supply.

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