deflation

Deflation (noun) – Meaning, Examples & Etymology

IPA:

What does deflation mean?

A general decline in the prices of goods and services over time.
"The retail sector struggled during the period of deflation, as consumers delayed purchases in anticipation of lower prices."

Detailed Meaning of Deflation

It is the opposite of inflation and represents a decrease in the overall purchasing power of currency. Deflation typically occurs when there is a decrease in aggregate demand or an increase in the supply of goods and services, leading to a surplus of products in the market. As a result, businesses may reduce prices to stimulate consumer spending, leading to a downward spiral of decreasing prices. Deflation can have various effects on an economy, including reduced profits for businesses, lower wages, increased unemployment, and a slowdown in economic growth. It can also lead to a higher burden of debt, as the value of money increases while the value of assets declines. Central banks and policymakers often implement measures to counter deflation and maintain stable prices to avoid negative economic consequences.

Example Sentences for Deflation

1. The prolonged deflation in the housing market caused property values to plummet.
2. The country's economy experienced deflation as prices consistently dropped over several quarters.
3. The central bank implemented monetary policies to combat deflation and stimulate economic growth.
4. Deflationary pressures resulted in widespread layoffs and job losses across various industries.
5. Falling prices of commodities and raw materials contributed to deflationary trends in the manufacturing sector.
6. The government introduced measures to encourage spending and combat deflationary pressures.

Origin and Etymology of Deflation

The noun 'deflation' draws its etymology from Latin roots. It is derived from the Latin word 'deflatio,' which is formed from 'de' meaning 'down' or 'away from' and 'flare' meaning 'to blow' or 'to puff.' Thus, the etymology of 'deflation' conveys the idea of a decrease or reduction in the value or 'blowing away' of prices, specifically referring to a general decline in the prices of goods and services over time. This term has preserved its historical connection to the concept of a shrinking or diminishing economic environment, reflecting its origins in Latin and its application in the field of economics to describe periods of falling prices.

Quiz Question - Test Your Understanding

Find the correct meaning of the noun deflation:

decrease

escalation

increase

inflation

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More Usage Examples of Deflation

1. Businesses faced difficulties in repaying loans as the deflation eroded their revenues.
2. The deflationary spiral led to a decrease in consumer confidence and a decline in consumer spending.
3. Investors sought safe-haven assets like gold during the period of deflation to protect their wealth.
4. The deflationary environment prompted businesses to implement cost-cutting measures to maintain profitability.
5. The central bank employed quantitative easing measures to combat deflation and inject liquidity into the economy.
6. Economic deflation can lead to reduced consumer spending.
7. Deflation can erode the value of investments and savings.
8. Falling prices during deflation can harm businesses.
9. Central banks aim to prevent prolonged deflation.
10. The Great Depression was marked by severe deflation.
11. Deflationary pressures can hinder economic growth.
12. Japan experienced deflation for many years.
13. Deflation can increase the burden of debt.
14. People hoard cash during times of deflation.
15. Wage cuts often accompany deflationary periods.
16. Deflation can lead to lower corporate profits.
17. Falling demand contributes to deflationary trends.
18. Deflation can create uncertainty in financial markets.
19. Policymakers seek strategies to combat deflation.
20. Asset prices may decline during deflation.
21. Deflation can trigger job losses and bankruptcies.
22. The central bank lowered rates to combat deflation.
23. Falling housing prices contribute to deflation.
24. The deflationary spiral can be hard to reverse.
25. Investors worry about the risks of deflation.