deflation

Also known as economic deflation, negative inflation, price decline, price erosion, price collapse, price deterioration

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.

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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Commons category: Deflation
Stack Exchange tag: money.stackexchange.com/tags/deflation

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Article

30 sections

Contents

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

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.