Deflation is a decrease in the general price level of goods and services in an economy over time, leading to an increase in the purchasing power of money. It is the opposite of inflation.
In an economic industry, deflation can have both positive and negative effects. During a period of deflation, consumers can buy more goods and services with the same amount of money, which can lead to increased consumption, demand, and economic growth. However, deflation can also lead to lower wages and profits, as businesses are forced to reduce their prices to remain competitive. This can lead to reduced investment and increased unemployment, causing a slowdown in the economy. Deflation can also increase the real value of debt, making it more difficult for borrowers to pay off their debts.
What is Deflation
Economy Term
Deflation is a decrease in the general price level of goods and services in an economy over time, leading to an increase in the purchasing power of money. It is the opposite of inflation.
In an economic industry, deflation can have both positive and negative effects. During a period of deflation, consumers can buy more goods and services with the same amount of money, which can lead to increased consumption, demand, and economic growth. However, deflation can also lead to lower wages and profits, as businesses are forced to reduce their prices to remain competitive. This can lead to reduced investment and increased unemployment, causing a slowdown in the economy. Deflation can also increase the real value of debt, making it more difficult for borrowers to pay off their debts.