What is Deflation?
Deflation is also known as the opposite of inflation, which refers to a condition “where there is a general decline in the prices of goods and services over a time period which results in the hike of currency purchasing power.” Usually, it is observed that the deflation occurs when the general price level declines due to lower inflation rate (i.e. below 0% or less also called negative inflation rate). During deflation, we buy more goods and services with the same amount as we were buying earlier. Deflation generally occurs due to either reduction in the supply of money or credits or due to direct contractions in spending. These spending may be in the form of a reduction in government spending, personal spending or investment spending. Continue reading