What are some historical examples of deflation?

What are some historical examples of deflation?

Deflation refers to a decrease in the general price level of goods and services. One notable example is the Great Depression in the 1930s, where prices fell significantly due to reduced consumer demand.

What caused the deflation during the Great Depression?

The deflation during the Great Depression was primarily caused by a collapse in consumer confidence, leading to decreased spending and investment. Additionally, bank failures and a contraction in the money supply exacerbated the situation.

Are there any other examples of deflation in history?

Yes, another example is Japan's 'Lost Decade' in the 1990s, where the economy faced prolonged deflation due to asset price bubbles bursting and stagnant economic growth.

How did deflation impact the economy during these periods?

Deflation can lead to reduced consumer spending as people anticipate lower prices in the future, which can result in lower production, higher unemployment, and a vicious cycle of economic decline.