This is the class blog for Busn170 taught at FCC 2008. All students are required to make at least one meanningful post or comment per week.

Wednesday, December 10, 2008

What is Deflation?

Most of us might have heard about increasing or decreasing inflation. I wondered if anyone of us knew the opposite of inflation, i.e, deflation. Here is a definition of deflation:

A decline in general price levels, often caused by a reduction in the supply of money or credit. Deflation can also be brought about by direct contractions in spending, either in the form of reduction in government spending. Deflation has often has the side effect of increasing unemployment in an economy, since the process often leads to a lower level of demand in the economy.

                                                                                                                                -Courtesy of InvestorWords.com

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