Resolved Question
Can someone tell me what deflation is?
about 1 year ago
Best Answer - Chosen by Voters
Deflation is when the price of a basket of goods and services decreases. You might be thinking, "Hey, isn't that a good thing?".
Well, not necessarily. While lower prices sounds good, if consumers know that prices will fall, then they will refrain from spending. Why would they buy something now when they know it'll cost less later? If consumers aren't spending, it isn't good for the economy, as there will be no growth.
about 1 year ago
Answers (1)
Deflation refers to a prolonged period of decreasing prices. In particular, when a country's annual inflation rate becomes negative, that's a sign that their economy is under deflation. If prices keep dropping, people might be more reluctant to spend since they're thinking that goods will be cheaper later on. This downturn in spending could lead to a decline in production (because demand is lower) and eventually a slowdown in hiring and investment.
about 1 year ago
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