Deflation

Deflation is a sustained decline in the general level of prices for goods and services. It increases the purchasing power of money, though its effects depend on causes and economic conditions.

Debt-deflation: A process in which falling prices increase the real burden of debt, prompting defaults and further economic contraction. It describes how deflation can intensify when indebted borrowers sell assets to repay fixed nominal debts.
Great Depression: A severe global economic crisis that began in 1929 and lasted through much of the 1930s. The United States experienced sharp deflation during the early years of this crisis.
Disinflation: A decline in the rate of inflation, without necessarily producing falling prices. Disinflation slows price increases; deflation means the general price level is falling.
Consumer price index: A statistical measure tracking changes over time in prices paid for a representative basket of consumer goods and services. Its changes are commonly used to identify deflation in consumer prices.
Real interest rate: The interest rate adjusted for inflation, measuring the change in purchasing power owed or earned. When prices fall, real borrowing costs can rise even if nominal interest rates do not change.
Japan's Lost Decades: A prolonged period of weak economic growth and price stagnation or decline in Japan beginning in the 1990s. Japan became a prominent case of persistent low inflation and intermittent deflation after its asset bubble burst.
Inflation: A sustained rise in the general level of prices for goods and services. Inflation is the opposite direction of change in the overall price level.
Gross domestic product deflator: A price index covering domestically produced final goods and services included in gross domestic product. It can reveal economy-wide price declines beyond the consumer basket.
Aggregate demand: Total planned spending on final goods and services in an economy at different price levels. Weak spending can push businesses to cut prices, while expected cuts can delay spending further.
Nominal debt: A debt obligation fixed in money terms rather than adjusted for prices or purchasing power. Deflation raises the amount of goods and services needed to repay an unchanged nominal obligation.

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