DEFLATION Meaning and
Definition
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Deflation refers to a sustained and widespread decrease in the general price level of goods and services in an economy over a period of time. It is the opposite of inflation, which represents an increase in prices. Deflation occurs when the supply of money and credit in an economy decreases or when there is a decrease in aggregate demand.
Deflation can arise due to various factors. One common cause is a decrease in consumer spending, which leads to a decline in demand for goods and services, forcing businesses to lower their prices to attract customers. Another factor contributing to deflation is a decrease in the money supply, which can occur when central banks reduce the amount of money in circulation. Additionally, technological advancements and improvements in productivity can lower production costs, resulting in deflationary pressures.
The consequences of deflation can be both positive and negative. On the positive side, falling prices can increase the purchasing power of consumers, allowing them to afford more goods and services. It can also encourage saving, as individuals and businesses expect prices to continue to decline. However, deflation can have detrimental effects on the economy. It can lead to reduced business profitability and investment, as well as job losses, as companies struggle to maintain revenues with lower prices. Additionally, deflation increases the real burden of debt, making it harder for borrowers to repay loans.
Overall, deflation is a complex economic phenomenon characterized by a sustained decline in the general price level, with both benefits and drawbacks depending on the specific circumstances and its duration.
Top Common Misspellings for DEFLATION *
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Other Common Misspellings for DEFLATION
Etymology of DEFLATION
The word "deflation" has Latin roots. It comes from the Latin prefix "de-" meaning "down" or "reversal of" and the Latin verb "flare" meaning "to blow". The combination of "de-" and "flare" in Latin led to the word "deflare", which originally meant "to blow off" or "to blow away". Over time, the meaning of "deflare" shifted to refer to the removal or reduction of air from something, which eventually gave rise to the term "deflation" as we know it today. In the economic sense, "deflation" refers to a sustained decrease in the overall price level of goods and services in an economy.
Similar spelling words for DEFLATION
- depletion,
- deflate,
- deflating,
- deflationary,
- depilation,
- deplete,
- devolution,
- defoliation,
- debilitation,
- deflated,
- deflator,
- devaluation.
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