Write a short note on Deflation ?


Deflation is the opposite of inflation. Just as inflation is a phenomenon of rising prices, deflation is a phenomenon of falling prices. In the words of Crowther, “Deflation is that state of the economy where the value of money is rising or the prices are falling.” No doubt, deflation is associated with falling prices, but it is not that each and every fall in price will be termed as deflation. Only those falls in prices, which result in unemployment, overproduction and fall in the economic activity are deflationary. In short, deflation is a situation in which falling prices are accompanied by falling levels of employment, output and income.

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