#Finterms: Deflation
Deflation is the decrease in the general price level of goods and services, leading to an increase in the purchasing power of money. It occurs when the supply of goods exceeds demand, often during economic downturns or periods of reduced consumer spending.
While lower prices might seem beneficial, prolonged deflation can signal economic problems, such as reduced business profits, rising unemployment, and slowed economic activity.
Deflation may cause consumers and businesses to delay purchases, expecting prices to fall further, which can deepen economic stagnation.
Central banks typically combat deflation by lowering interest rates or employing other monetary policy tools to stimulate demand and encourage investment.
#Inflation #EconomicTrends #PriceStability #MonetaryPolicy #FinancialLiteracy
