Deflation
Deflation is a persistent fall in the general price level, where inflation is negative. Prices fall and the purchasing power of money increases. Deflation is typically associated with economic problems and reduced demand.
Real World
Japan experienced persistent deflation throughout the 1990s and 2000s, with consumers delaying purchases of electronics and cars, contributing to two decades of stagnant growth known as the 'Lost Decades'.
Exam Focus
Never confuse deflation (negative inflation) with disinflation (falling but positive inflation) — this is a common mark-losing error.
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