Deflation - Financial definition
Concise definition of the term deflation
Deflation in finance and economics refers to a decrease in the general price level of goods and services, leading to an increase in the purchasing power of money.
Comprehensive definition of the term deflation
Deflation typically occurs during periods of economic recession or depression, where there is a reduction in the supply of money or credit, causing consumers and businesses to spend less. This reduction in demand can lead to falling prices and wages, which may result in decreased production and increased unemployment.
Historical examples include the Great Depression of the 1930s. Market practices to counter deflation include central banks reducing interest rates and implementing quantitative easing to increase money supply and stimulate spending.