deflation

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Related to deflationary: deflationary gap, Deflationary spiral

Deflation

Decline in the prices of goods and services. Antithesis of inflation.

Deflation

A situation in which a currency gains value, often resulting from a decrease in prices. Many economists believe that deflation is the result a fall in demand for goods and services, which causes producers to reduce prices. This reduces their profits and causes a reduction in investment, which contributes to a further drop in demand. Because of this deflationary spiral, deflation is often associated with recessions and depressions and has been known to cause unemployment. It is also called negative inflation. See also: Lost Decade, Inflation.

deflation

A reduction in consumer or wholesale prices. The term generally applies to more than just a temporary decline. Compare inflation. See also disinflation.

Deflation.

Deflation, the opposite of inflation, is a gradual drop in the cost of goods and services, usually caused by a surplus of goods and a shortage of cash.

Although deflation seems to increase your buying power in its early stages, it is generally considered a negative economic trend. That's because it is typically accompanied by rising unemployment, falling production, and limited investment.

deflation

a fall in the rate of growth of the general level of prices in an economy, or an absolute reduction in the general level of prices (see PRICE INDEX). The authorities may seek to deflate the economy in order to combat INFLATION and eliminate a BALANCE OF PAYMENTS deficit by using restrictive monetary and fiscal measures, i.e. increasing interest rates and taxes to cut spending. See ECONOMIC POLICY, MONETARY POLICY, FISCAL POLICY, PRICES AND INCOMES POLICY.

deflation

a reduction in the level of NATIONAL INCOME and output usually accompanied by a fall in the general price level (DISINFLATION).

A deflation is often deliberately brought about by the authorities in order to reduce INFLATION and to improve the BALANCE OF PAYMENTS by reducing import demand. Instruments of deflationary policy include fiscal measures (e.g. tax increases) and monetary measures (e.g. high interest rates). See MONETARY POLICY, FISCAL POLICY.

References in periodicals archive ?
Assuming the deflationary period follows some years of declining growth, as it did in Japan and usually does, top-down statistical methods will automatically infer that potential growth has been falling (and thus inflationary risks for a given growth level rising), whether or not there is fundamental reason to do so.
Historical precedents suggest that gold's worth is powerful during deflationary periods.
While the deflationary phenomenon has many causes, there can be no doubt that in part it has resulted from retailers and manufacturers making marginal reductions in prices for short-term competitive advantage.
The BOJ chief stressed the central bank will ''closely monitor'' economic developments to prevent a deflationary spiral.
Yamaguchi added that the risk of Japan falling into a deflationary spiral is ''small,'' saying that prices are continuing to fall at the moment but the pace of decline is likely to moderate from the latter half of fiscal 2009.
And it has been doing that literally from the first day the deflationary gap surfaced back in the early 1990s.
If that happens, the deflationary pressure being felt right across the market will inevitably get worse.
Business in the Middle Kingdom will continue to boom, he says, while Japan will be content to sink deeper into its deflationary quicksand.
Vice Finance Minister Toshiro Muto said Monday the government is not seeking a conventional type of extra budget aimed at boosting demand because it does not think the nation's economy is in a deflationary spiral.
Zax, Chairman and President, said "Continued deflationary cost trends make rate reductions appropriate.
Bank of Israel governor, Stanley Fischer, said that advanced economies might not face a deflationary threat because the US economy is recovering faster than anticipated.
6 percent in June from a year earlier on lower energy and material prices and weakening domestic demand, the Bank of Japan said Friday, providing fresh evidence of increasing deflationary pressure in the recession-hit country.