Deflation

Deflation is an economic condition characterized by a general decline in the prices of goods and services within an economy. This decline in prices is often associated with a reduction in the supply of money and credit circulating in the economy. During deflation, the purchasing power of a unit of currency increases over time, as it can buy more goods and services due to falling prices. Deflation can have a range of economic implications, including reduced consumer spending, increased real debt burden, and the potential for a deflationary spiral if left unaddressed. Central banks and policymakers often employ monetary policy tools to combat deflation and maintain price stability.