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In economics, deflation is a decrease in the general price level of goods and services. [1] Deflation occurs when the inflation rate falls below 0% (a negative inflation rate). Inflation reduces the value of currency over time, but deflation increases it. This allows more goods and services to be bought than before with the same amount of currency.
What are the possible side effects of disinflation vs. deflation on financial markets? Disinflation, for the most part, tends to have less of an impact on outcomes. That’s because stock prices ...
According to experts, deflation — defined as a general decline in prices for goods and services — can have significant and often detrimental effects on the economy and our individual finances.
In China, the effects of deflation have taken a major toll on stocks, making it the worst-performing equity market in the world last year.
Deflation is in almost all cases a side effect of a collapse of aggregate demand – a drop in spending so severe that producers must cut prices on an ongoing basis in order to find buyers. Likewise, the economic effects of a deflationary episode, for the most part, are similar to those of any other sharp decline in aggregate spending—namely ...
Debt deflation is a theory that recessions and depressions are due to the overall level of debt rising in real value because of deflation, causing people to default on their consumer loans and mortgages. Bank assets fall because of the defaults and because the value of their collateral falls, leading to a surge in bank insolvencies, a reduction ...
Deflation, on the other hand, lowers the cost of everything, including the assets of people and businesses. The more assets lose value, the more expensive debt becomes, so people and businesses ...
The onset of the COVID-19 pandemic in March 2020 brought an increase in overall inflation that hadn't been seen in decades -- higher demand and lower supply (combined with supply chain issues) all...