In economics, deflation can be described as a decrease in the general price level of goods and services or currency appreciation with respect to the same goods and services. Deflation occurs when the inflation rate falls below 0% (a negative inflation rate). 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 and services than before with the same amount of money. Economists generally believe that deflation is a problem in a modern economy because it may increase the real value of debt, especially if unpredictable, and may aggravate recessions and lead to a deflationary spiral. Deflation is distinct from disinflation, a slow-down in the inflation rate, i.e. when inflation declines to a lower rate but is still positive.

Read full article on Wikipedia · CC-BY-SA