What is deflation
Deflation is the definition that is the opposite of inflation. This word comes from the Latin word meaning «to swell». This economic process determines the increase in the cost of money, as well as their ability in the market. Today, deflation is being seen as an adverse factor, it entails such unpleasant consequences, such as stagnation and decline in economic growth. To understand what is deflation, must be well versed in economic matters.
Depends on what deflation is
At first glance it may seem that the growth of purchasing power, there is nothing wrong. But if we consider the example of such changes, they have not happy. For example, if a few days ago could be bought for 100 rubles 1 kg of sausage, today these money will be enough for 1.5 kg of sausage. The question arises: is it bad? Of course, for the average buyer it is good because he will be able to buy much more products.
But, if we consider the situation from the other side, you can find a lot of flaws. All the reasons why deflation is formed, can cause people to completely get rid of his wages or will get much less. Deflation occurs when there is low demand for products. The number of buyers is significantly reduced, and production is at the same level. As the demand does not meet all the needs of manufacturers and their products will remain stagnant on the supermarket shelves, they are simply forced to reduce their prices.
What causes deflation?
- If oil prices reaches a level at which the goods does not pay off, it completely stops performance.
- Reduced wages and pensions.
- Reduced product quality due to the shortage of Finance.
- Falling value of the monetary unit.
- The outbreak of the crisis.
The culprit of this is the deflation that occurs as a result of violations of the economic process. Ordinary citizens do not have the power to prevent this process, all involved a higher power, who are responsible for certain changes in the economy.