Why might deflation create problems for an economy

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According to Keynes, why might deflation create problems for an economy?

?In expectation of increased spending, too many entrepreneurs would begin businesses and most would fail.

?Consumers might expect prices to fall further and cut back consumption now.

?The cost of reprising goods would increase costs, and therefore reduce profits, for businesses and they would cut production.

?People would drop out of unions because unions would become ineffective at keeping wages of members high.

Reference no: EM13897129

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