Finance
What is Deflation?
Deflation is a general fall in prices across an economy — the opposite of inflation. While cheaper goods sound good, deflation can be dangerous: people delay spending expecting lower prices, which slows the economy and can deepen downturns.
See it, don’t just read it.
Watch a 2-minute lesson with voice + animation that explains deflation.
Key things to understand
- 1It's a broad, sustained fall in prices.
- 2It's the opposite of inflation.
- 3It can make people delay purchases.
- 4That can slow the economy and worsen recessions.
Frequently asked questions
- What is deflation?
- A general, sustained decline in prices across an economy — the opposite of inflation.
- Why is deflation bad?
- People postpone spending expecting lower prices, which can stall growth, cut jobs, and deepen downturns.
- What causes deflation?
- Falling demand, reduced money supply, or sharp productivity gains can all push prices down.