What is deflation?
Deflation is a sustained decline in the overall price level.
Definition, calculation and mechanism
A sale on one product or inflation slowing from 10% to 5% is not deflation. Weak demand can trigger it, while productivity-driven declines may have different consequences. Index coverage and duration matter.
Interpretation, examples and limits
If income and prices fall while debts remain fixed in nominal terms, real debt burdens can rise. Purchases may be delayed, though every price decline does not automatically create a spiral. Monitor wages and employment too.
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