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Deflation is the process of a decrease in the general price level of goods and services in an economy over time. It typically occurs when there is a reduction in the supply of money or credit, leading to decreased consumer spending and investment. As demand falls, businesses lower prices to attract customers, which can result in reduced revenues and profits, further exacerbating the economic slowdown. Prolonged deflation can lead to increased unemployment and economic stagnation, making it a significant concern for policymakers.

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