ECONOMICS (CBSE/UGC NET)

Detailed explanation-1: -It is the opposite of inflation, which is when general price levels in a country are rising. In the short-term, deflation impacts consumers positively because it increases their purchasing power, allowing them to save more money as their income increases relative to their expenses.

Detailed explanation-2: -Decrease in consumer spending: When prices are falling, consumers may delay purchases in the hope of getting a better deal in the future. This can lead to a decrease in overall consumer spending and economic activity.

Detailed explanation-3: -Deflation is a process where prices of consumer goods and services fall and money increases in value. Longer periods of deflation can lead to higher unemployment, a decrease in demand, and a reduction in economic activity. Deflation doesn’t necessarily affect the whole economy.

Detailed explanation-4: -Deflation creates incentives to save and postpone spending because prices will be lower and purchasing power greater in the future. This pattern depresses spending and weakens the economy.