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Economic Issues of the Great Depression
Economic Issues of the Great Depression

File - Critical Thinking is Required
File - Critical Thinking is Required

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Deflation

In economics, deflation is a decrease in the general price level of goods and services. Deflation occurs when the inflation rate falls below 0% (a negative inflation rate). This should not be confused with disinflation, a slow-down in the inflation rate (i.e., when inflation declines to lower levels). Inflation reduces the real value of money over time; conversely, deflation increases the real value of money –- the currency of a national or regional economy. This allows one to buy more goods with the same amount of money over time.Economists generally believe that deflation is a problem in a modern economy because it increases the real value of debt, and may aggravate recessions and lead to a deflationary spiral.Although the values of capital assets are often casually said to ""deflate"" when they decline, this should not be confused with deflation as a defined term; a more accurate description for a decrease in the value of a capital asset is economic depreciation (which should not be confused with the accounting convention of depreciation, which are standards to determine a decrease in values of capital assets when market values are not readily available or practical).
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