Deflation Explained

Deflation occurs when the general price of goods and services reduces and causes inflation to fall below 0%.

Deflation increases the relative value of money and allows consumers and businesses to buy more goods and services. Whilst deflation can seem a good thing in the short term, deflation can aggravate or cause recessions as demand drops as people believe the goods/services they buy now may be cheaper tomorrow. The resulting drop in demand-inflation can result in over-production / excess availability of services which in turn leads to an economic slump.

If you find the information on inflation and its affect on income then we kindly request that you take a second to provide a rating below and or share to your favourite social network.

[ No Votes ]

Next: Understanding Inflation

Previous: Inflation Explained

Inflation Guides and Inflation Calculators