what is deflation

Deflation is a decrease in the general price level of goods and services. It occurs when the inflation rate falls below 0% . Deflation is distinct from disinflation, which is a slowdown in the inflation rate. During deflation, the purchasing power of currency rises over time. Deflation can be caused by an increase in productivity and the abundance of goods and services, a decrease in total or aggregate demand, or a decrease in the supply of money and credit. Economists generally believe that a sudden deflationary shock is a problem in a modern economy because it increases the real value of debt, especially if the deflation is unexpected. Deflation may also aggravate recessions and lead to a deflationary spiral. However, most of the time, deflation is unambiguously a positive trend for the economy.