What is deflation and what problems can it cause for the economy?
In economics, deflation is a persistent decrease in the general price level of goods and services. Deflation occurs when the inflation rate falls below zero percent, resulting in an increase in the real value of money — a negative inflation rate. Inflation reduces real value in money, deflation increases the real value in money. This should not be confused with disinflation, a slow down in the inflation rate (when inflation decreases, but remains positive). Deflation is considered a problem in a modern economy because of the potential of a deflationary spiral and its association with the Great Depression, although not all episodes of deflation correspond to periods of poor economic growth historically.In economic theory, deflation is a general reduction in the level of prices below zero percent annual inflation. Deflation should not be confused with temporarily falling prices; instead, it is a sustained fall in general prices once inflation passed zero percent to the downside. In the I
