Deflation
Definition. Deflation is a sustained fall in the general price level of goods and services in an economy, shown by a negative rate of inflation over a period. It increases the real value of money and debt and may reflect either falling demand or rising productivity.
Malign deflation driven by weak demand can deepen a downturn as households delay spending in expectation of lower prices. Benign deflation from cost reductions can coincide with healthy growth.
This term belongs to Measuring Inflation and the CPI in A Level Economics. Read the full chapter for the diagrams, worked examples and exam technique.
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