The 'Slutsky Equation' decomposes the total effect of a price change on the quantity demanded of a good into the 'Substitution Effect' and the 'Income Effect', proving that Giffen goods must necessarily be inferior goods with a massive negative income effect.

Answer: True

When the price of a good falls, the Substitution Effect always encourages the consumer to buy more of it. However, the price drop also increases the consumer's real purchasing power (Income Effect). For a normal good, both effects work together to increase demand. For a Giffen good (a severe inferior good like potatoes during a famine), the negative Income Effect is so overwhelmingly large that it completely swamps the Substitution Effect, causing demand to perversely fall when the price drops.