Deflation

Deflation is simply negative inflation.

In general, inflation is positive at the level of an economy as a whole. Deflation at that level is most likely during recessions, and does not always occur even then.

There are a number of reasons why deflation is rare. One of the most important is that it is difficult to reduce wages. This means that suppliers cannot easily reduce the prices of labour intensive products and services, even in response to low demand.

Deflation is not common in certain industries. In certainly technology sectors it is usual.

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