Deflation
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Inflation is an increase in the general prices of goods and services in an economy.
Deflation. While this may seem like a great thing for shoppers the actual cause of widespread deflation is a long term drop in demand. Deflation is a contraction in the supply of circulated money within an economy and therefore the opposite of inflation. In theory modest deflation could aid an economic recovery by making goods and services cheaper. Rather deflation is a sign that something is seriously out of whack with the economy.
Deflation occurs when asset and consumer prices fall over time. Deflation makes the situation worse inflation makes the situation less bad. In times of deflation the purchasing power of currency and wages are. Will most people even notice 7 inflation a year.
When the overall price level decreases so that inflation rate becomes negative it is called deflation. Deflation occurs when the inflation rate falls below 0 a negative inflation rateinflation reduces the value of currency over time but sudden deflation increases it. Deflation conversely is the general decline in prices for goods and services indicated by an inflation rate. And deflation isnt easy to fix.
A reduction in money supply or credit availability is the reason for deflation in most cases. Deflation is not a routine feature of the economic cycle which is marked by alternating periods of expansion and contraction against a backdrop of steadily rising prices. It ought to be expected given the precedent set in the aftermath of the last global economic downturn. Reduced investment spending by government or individuals may also.
It is the opposite of the often encountered inflation. Nevertheless there is often a link between monetary and price deflation so monitoring the annual percentage change in consumer prices is useful. The proper definition of inflation or deflation refers to the monetary side. This allows more goods and services to be bought than before with the same amount of currency.
In economics deflation is a decrease in the general price level of goods and services. That is an expansion or contraction in the amount of money and credit in an economy.
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