Definition
Deflation refers to a decrease in the general price level of goods and services in an economy, signaling a decline in demand for those goods and services, often resulting in lower wages, higher unemployment, and reduced economic growth.
Pronunciation
US English
UK English
Part of Speech
Noun
Synonyms
decrease, reduction, lowering, downturn, decline, slump, compression, contraction
Antonyms
inflation, expansion, growth, increase, rise, upswing, escalation, appreciation
Word Forms
| Part of Speech | Words |
|---|---|
| Noun | deflators, deflation, deflations, deflator |
| Verb | deflating, deflated, deflate, deflates |
| Adjective | deflationary |
| Adverb | None |
Example Sentences
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The prolonged deflation of the 1930s caused immense economic hardship, leading to high unemployment rates and widespread poverty.
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The central bank is taking steps to avoid deflation by keeping inflation rates moderately low and stable over the long term.
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The company’s deflation strategy, aimed at lowering prices to undercut its competitors, resulted in reduced demand and lower profits.
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In response to falling prices and consumer demand, the government has implemented policies to stimulate economic growth and reverse deflationary pressures.
Usage
Deflation is a term that is used primarily in the context of economics and finance. It is used to describe a period of declining prices for goods and services, which can be caused by a variety of factors such as decreased consumer demand, technological advancements, or economic recession. Deflationary periods can be harmful to the economy, as they can lead to decreased economic growth, rising unemployment rates, and increased levels of debt.
The term deflation is derived from the Latin word deflare, which means ’to blow away.’ The prefix “de-” means “down” or “away,” and the root “flatus” refers to “blowing.” The suffix “-ion” is a noun-forming suffix and is commonly used to convert a verb into a noun. Thus, the word deflation literally means “to blow down or away,” which is a fitting description of the effect a deflationary period has on the economy.
There are different types of deflation. Mild deflation can lead to lower prices and more affordable goods and services, which can be beneficial to consumers. However, prolonged periods of deflation can result in falling wages, decreased demand, and decreased economic activity. This, in turn, can lead to a vicious cycle of increasing unemployment, reduced consumer spending, and further economic contraction.
In short, the usage of the term deflation is crucial in understanding the economic and financial landscape of a country or region. It is a useful tool for explaining the factors that contribute to rising or falling prices, and what measures policymakers can take to mitigate the negative effects of a deflationary period. The term deflation is an essential component of economic discourse, and its meaning, history, and implications continue to be relevant and important today.