Deflation

Deflation happens when the prices of goods and services fall over time, making money more valuable. While this might sound good initially, deflation can harm the economy. People might delay their purchases as prices drop, expecting prices to fall further. This leads to reduced spending, lower production, and potentially job losses. For businesses, it becomes harder to make a profit, which can cause them to cut wages or even close. Deflation can especially hurt people who are in debt, as the value of their debts becomes higher in real terms.