What is defation?

Deflation is the opposite of inflation. It happens when the prices of goods and services go down over time.

 

While this may sound like a good thing because people can buy more with their money, it can actually be harmful to the economy. When prices fall, businesses may earn less money, which can lead them to reduce production, cut salaries, or lay off workers.

 

For example, if a car that cost $20,000 this year is expected to cost $18,000 next year, people might wait to buy it. If everyone does this, companies will sell less, and the economy can slow down.

 

Deflation can lead to less investment, more unemployment, and economic recession if not controlled properly.