Deflation
What is Deflation?
A sustained fall in the general level of prices.
Understanding Deflation
Deflation is the opposite of inflation: money buys more over time. It sounds good for shoppers, but widespread deflation can hurt an economy.
When people expect prices to keep falling, they delay purchases, and debts become heavier in real terms. Lower spending can push prices and wages down further, a cycle known as a deflationary spiral.
FAQ
Is deflation the same as disinflation?
No. Disinflation means inflation is slowing, but prices are still rising. Deflation means prices are falling.