What is the economic term for a general drop in prices across the economy?

The correct term for a general drop in prices across the economy is deflation. Deflation occurs when there is a decrease in the general price level of goods and services, which often results from a decrease in the supply of money or credit, or due to a reduction in demand for goods and services. This phenomenon can lead to consumers postponing purchases in anticipation of lower prices in the future, thus exacerbating economic slowdowns.

In contrast, a recession refers to a significant decline in economic activity across the economy lasting longer than a few months, typically marked by falling GDP, reduced employment, and declining consumer spending. Similarly, depression is a more severe and prolonged economic downturn compared to recession, usually characterized by high unemployment rates and a significant drop in economic activity.

Stagflation is a situation where inflation and unemployment rates rise concurrently, which complicates economic policymaking because the usual tools for controlling inflation can worsen unemployment, and vice versa. Thus, deflation specifically addresses the context of dropping prices, making it the correct answer in this scenario.