Question

The people described spent their money during different time periods. Label each of their scenarios as to whether they bought their goods during a time of inflation, deflation, or price stability.

Answer 1

Answer:

1. Peter is a compulsive gamer. He decides to buy World of Warcraft, all of its expansions, Starcraft 2, a PS3, a Wii, and an Xbox 360 since prices in general have been rising at an alarming rate. INFLATION
2. Melissa decides to start her own personal library and chooses to amass a private collection of books and magazines about world religions, cooking, comics, and economics. As she reads an issue of The Economist, she discovers overall price levels have changed only 0.01% in the past 2 years and decides it doesn't matter whether she starts the project now or later. PRICE STABILITY
3. Linda postpones her wedding even though most food prices and most service prices were dropping this year, which would help keep the cost of the wedding down.  DEFLATION

Linda's money earned the most value because deflation means that the currency is gaining value as time passes. It is the opposite to inflation where a currency loses value as time passes.