deflationdɪˈfleɪ ʃən
deflation (n)
- plural
- deflations
English Definitions:
deflation (noun)
(geology) the erosion of soil as a consequence of sand and dust and loose rocks being removed by the wind
"a constant deflation of the desert landscape"
deflation (noun)
a contraction of economic activity resulting in a decline of prices
deflation (noun)
the act of letting the air out of something
deflation (Noun)
An act or instance of deflating.
deflation (Noun)
A decrease in the general price level, that is, in the nominal cost of goods and services as well as wages.
deflation (Noun)
An economic contraction.
Deflation
In economics, deflation is a decrease in the general price level of goods and services. Deflation occurs when the inflation rate falls below 0%. This should not be confused with disinflation, a slow-down in the inflation rate. Inflation reduces the real value of money over time; conversely, deflation increases the real value of money – the currency of a national or regional economy. This allows one to buy more goods with the same amount of money over time. Economists generally believe that deflation is a problem in a modern economy because it increases the real value of debt, and may aggravate recessions and lead to a deflationary spiral. Historically not all episodes of deflation correspond with periods of poor economic growth. Deflation occurred in the U.S. during most of the 19th century. This deflation was caused by technological progress that created significant economic growth. This deflationary period of considerable economic progress preceded the establishment of the U.S. Federal Reserve System and its active management of monetary matters.
Deflation
In economics, deflation is a decrease in the general price level of goods and services. Deflation occurs when the inflation rate falls below 0% (a negative inflation rate). Inflation reduces the value of currency over time, but sudden deflation increases it. This allows more goods and services to be bought than before with the same amount of currency. Deflation is distinct from disinflation, a slow-down in the inflation rate, i.e. when inflation declines to a lower rate but is still positive.Economists generally believe that a sudden deflationary shock is a problem in a modern economy because it increases the real value of debt, especially if the deflation is unexpected. Deflation may also aggravate recessions and lead to a deflationary spiral.Some economists argue that prolonged deflationary periods are related to the underlying of technological progress in an economy, because as productivity increases (TFP), the cost of goods decreases.Deflation usually happens when supply is high (when excess production occurs), when demand is low (when consumption decreases), or when the money supply decreases (sometimes in response to a contraction created from careless investment or a credit crunch) or because of a net capital outflow from the economy. It can also occur due to too much competition and too little market concentration.
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