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Deflation

DEFLATION


Deflation is a general and sustained reduction in the level of prices. It is the opposite of inflation. Falling prices may seem to bring widespread benefits to society, making everything more affordable; in reality, deflation may pose serious dangers. Falling prices are usually a sign that economic activity is slowing down to an alarming degree. That means that companies take in less money and make less profit; therefore, they can hire fewer workers and they may have to lay off those they have. Falling prices also mean that fewer companies will be able to invest in new plants and equipment. Failures to modernize can often hurt companies in the long run. With smaller paychecks, families will buy less, which further dampens economic activity. Extreme examples of deflation, most notably the Great Depression (19291939) of the 1930s, have been marked by hardship and high unemployment. In general, economists prefer that prices neither rise nor fall too quickly; they instead prefer to see prices remain steady over time.

See also: Inflation, Price

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deflation

de·fla·tion / diˈflāshən/ • n. 1. the action or process of deflating or being deflated. 2. Econ. reduction of the general level of prices in an economy. 3. Geol. the removal of particles of rock, sand, etc., by the wind. DERIVATIVES: de·fla·tion·ist / -ist/ n. & adj.

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deflation

deflation Falling prices, accompanied by falls in output and employment; the opposite of inflation. It normally occurs during a recession or depression, and can be measured by the price index. Excess production capacity leads to an excess of supply, in which manufacturers supply more goods than consumers wish to buy, and usually causes deflation.

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deflation

deflation The removal of material from a land surface by aeolian processes. It is most effective where extensive unconsolidated materials are exposed (e.g. on beaches, and on dry lake and river beds). The very large, enclosed hollows of many deserts (e.g. the Qattara Depression of the Egyptian Sahara) may be owing to deflation.

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deflation

deflation The removal of material from a land surface by aeolian processes. It is most effective where extensive unconsolidated materials are exposed, e.g. on beaches, and on dry lake and river beds. The very large, enclosed hollows of many deserts (e.g. the Qattara Depression of the Egyptian Sahara) may be due to deflation.

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deflation

deflation See polynomial equation.

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deflation

deflation: see inflation.

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