Deflatsiooniline

Deflatsiooniline is a term used to describe a period of general decline in prices across an economy. This contrasts with inflation, where prices tend to rise. When deflation occurs, the purchasing power of money increases, meaning that each unit of currency can buy more goods and services than before.

Several factors can contribute to deflation. A significant decrease in the money supply, often caused by tight monetary policy or a banking crisis, can lead to less money chasing the same amount of goods, thus pushing prices down. Reduced demand for goods and services, perhaps due to a recession, decreased consumer confidence, or a significant drop in investment, can also trigger deflation as businesses try to sell excess inventory by lowering prices. Technological advancements that lead to greater efficiency and lower production costs can also contribute to falling prices for certain goods.

Deflation can have both positive and negative consequences. On the positive side, it can benefit consumers and savers as their money becomes more valuable. However, prolonged or severe deflation can be detrimental. Businesses may find their profits shrinking, leading to reduced investment, layoffs, and a contraction in economic activity. Consumers might delay purchases, expecting prices to fall further, which can exacerbate the economic downturn. A deflationary spiral, where falling prices lead to reduced demand, which leads to further price cuts, is a significant concern for policymakers. Central banks often aim to maintain a low, stable level of inflation to avoid the risks associated with deflation.