deflation
Sign in to saveIn economics, deflation is an increase in the real value of the monetary unit of account, as reflected in a decrease in the general price level of goods and services exchanged, measurable by broad price indices.
AI overview
Deflation is when the general prices of goods and services fall over time, meaning each unit of money becomes worth more than it was before. It matters because deflation can affect economic decisions—for example, people and businesses may delay spending if they expect prices to drop further, which can slow economic activity.
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Article
30 sectionsContents
- Causes and corresponding types
- Growth deflation
- Bank credit deflation
- Debt deflation
- Money supply-side deflation
- Credit deflation
- Historical examples of credit deflation
- Scarcity of official money
- Currency pegs and monetary unions
- Effects
- On spending and borrowing
- On savings and investments
- Compared with inflation
- Deflationary spiral
- Counteracting deflation
- Special borrowing arrangements
- Capital
- Historical examples
- EU countries
- Hong Kong
- Ireland
- Japan
- United Kingdom
- United States
- Major deflations in the United States
- Minor deflations in the United States
- See also
- Notes
- References
- External links
In economics, deflation is an increase in the real value of the monetary unit of account, as reflected in a decrease in the general price level of goods and services exchanged, measurable by broad price indices.
Deflation occurs when the inflation rate falls below 0% and becomes negative. While inflation reduces the value of currency over time, deflation increases it. This allows more goods and services to be bought than before with the same amount of currency, but means that more goods or services must be sold for money in order to finance payments that remain fixed in nominal terms, as many debt obligations may. Deflation is distinct from disinflation, a slowdown in the inflation rate; i.e., when inflation declines to a lower rate but is still positive.