Pros and Cons of Deflation



Pros and Cons of Deflation

Deflation

Deflation is defined as a fall in the general price level. It is a negative rate of inflation. It means the value of money increases rather than decreases. In the twentieth century, periods of deflation have been rare. Generally, western economies have experienced inflation. The most significant period of deflation was in the 1920s and 1930s. These decades (especially, the 1930s) were characterised by economic depression. Therefore, deflation is often considered to be very damaging.

Can deflation be beneficial?

According to Merrill Lynch economist David Rosenberg, “A benign down turn in charges amidst sluggish ...