What Is Deflation? Meaning & Example
Definition
Deflation is a general decline in prices across an economy. While lower prices sound good, persistent deflation can discourage spending and hurt growth.
Related terms
Inflation is the general rise in prices across an economy over time, which reduces what each unit of money can buy. Moderate inflation is normal, while high inflation erodes savings quickly.
RecessionA recession is a significant, widespread decline in economic activity lasting more than a few months. It often brings rising unemployment and falling business profits.
Monetary PolicyMonetary policy refers to central bank actions, such as setting interest rates and managing the money supply, to influence the economy. Tighter policy cools activity, while looser policy supports it.
What is Deflation?
Deflation is a general decline in prices across an economy. While lower prices sound good, persistent deflation can discourage spending and hurt growth.
Can you give an example of Deflation?
If people expect prices to keep falling, they may delay purchases, slowing the economy further.