deflation

(redirected from deflationary)
Also found in: Dictionary, Thesaurus, Medical, Encyclopedia, Wikipedia.
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 ?
Those who are predicting higher interest rates or planning for sustained pricing power are going to be proven wrong by the ongoing march of technological development and its powerfully deflationary forces.
The impotence of quantitative easing highlights the risk that unconventional monetary easing cannot eliminate the deflation threat; it merely deflects deflationary pressures from the quantitative easing countries to the non-quantitative easing countries via currency depreciation.
This would adversely affect debt dynamics in the periphery and would create a deflationary bias in the eurozone as a whole.
The so-called "core-core" index, excluding both food and energy, and widely seen as the least volatile reading, dropped 0.6 percent, underlining the deflationary trend.
A massive overvaluation carries the risk of a recession as well as deflationary developments.
"In coming months we might see a small reversal of deflationary trends, but the overall average for the year will be deflationary, because of the strong deflationary trends for the first half of the year," he said.
Prechter, one of the world's leading proponents of the deflationary scenario, warns that the global economy will be hit by a deflationary spiral that will wreck havoc on all aspects of the economy and financial system.
For example, for a faster repayment, apply more of both levers or for more stimulus for a given rate of repayment, apply more of the stimulatory lever relative to the deflationary one.
In this scenario, a central bank could easily counteract a deflationary shock that reduces prices and expected inflation (which could potentially raise the real rate temporarily and depress the economy) by lowering the real rate, or equivalently, by lowering the nominal rate by an amount greater than the fall in prices.
It states: "The fact that UK households' balance sheets are more stretched than in many other countries makes the risk of deflationary dynamics larger than elsewhere."
That is down from 14 per cent in February and 17 per cent last November - although this time last year only one per cent saw a deflationary future.
It's notable that Japan's economy did not fall into a depression during a deflationary period that lasted from the early nineties until 2007.