When is there deflation?

Answer 1

Deflation occurs when the general price levels of goods and services decline over time, often due to a decrease in demand or an increase in supply. It can be triggered by factors such as reduced consumer spending, tighter credit conditions, or an oversupply of goods. While falling prices might seem beneficial, deflation can lead to reduced consumer confidence, lower production, and increased unemployment, creating a negative economic cycle. Central banks may respond to deflation by implementing monetary policies aimed at stimulating demand.