deflation

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Related to deflations: Deflationary spiral, Negative Inflation

Deflation

Decline in the prices of goods and services. Antithesis of inflation.
Copyright © 2012, Campbell R. Harvey. All Rights Reserved.

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.
Farlex Financial Dictionary. © 2012 Farlex, Inc. All Rights Reserved

deflation

A reduction in consumer or wholesale prices. The term generally applies to more than just a temporary decline. Compare inflation. See also disinflation.
Wall Street Words: An A to Z Guide to Investment Terms for Today's Investor by David L. Scott. Copyright © 2003 by Houghton Mifflin Company. Published by Houghton Mifflin Company. All rights reserved. All rights reserved.

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.

Dictionary of Financial Terms. Copyright © 2008 Lightbulb Press, Inc. All Rights Reserved.

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.
Collins Dictionary of Business, 3rd ed. © 2002, 2005 C Pass, B Lowes, A Pendleton, L Chadwick, D O’Reilly and M Afferson

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.

Collins Dictionary of Economics, 4th ed. © C. Pass, B. Lowes, L. Davies 2005
References in periodicals archive ?
Growth deflation is of special interest since it may explain long periods of deflation with increasing output observed in the gold standard era of the late 19th century.
Similarly they find little evidence of a relationship between output and prices, but their sample is limited to a period that had generally few episodes of deflation.
They find a lagged negative impact of deflation on economic growth, although the economic significance (the magnitude of the coefficient) is rather small.
This movement corresponds to the overall decline associated with monetary deflation that we discussed in the last section.
In a monetary deflation, we get the reduction in the output of consumer goods and fewer resources devoted to those later stages, but no change at the left end of the triangle.
During deflation, resources make possible the excess inventories that are coming from the resources taken away from the later stages of production as a consequence of the reduction in consumption caused by the insufficient money supply.
The second type of deflation, however, is the result of positive aggregate supply shocks that are not accommodated by an easing of monetary policy.
Figure 1 illustrates these two distinct forms of deflation using the standard textbook aggregate demand-aggregate supply (AD-AS) framework.
Although history suggests that large deflations are a cause for concern, this Commentary contends that occasional modest deflations (in the range of 1 percent to 2 percent annually) should little concern policymakers.
[1] This success has led to a new concern--could deflation be a problem?
According to economic theory, deflation fuels expectations that prices will continue to fall, encouraging consumers, businesses and government to put off purchases, thus holding back growth.
Without central bank stimulus measures, deflation will probably define the rest of the decade.