100%(1)1 out of 1 people found this document helpful
This preview shows page 1 - 3 out of 4 pages.
Damaging Effects of Deflation on an EconomyDamaging Effects of Deflation on an EconomyStudent NameInstitution
Damaging Effects of Deflation on an EconomyDamaging Effects of Deflation on an EconomyDeflation is the intermittent decline in prices which is disastrous to the economy of a country. It only occurs when the supply and demand curve is disproportionate because the goods overflow the market and so for them to be easily disposed of, the price must be lowered Some of the majorcauses of deflation include increase in production which ultimately overwhelms the demand side;change in the structure of capital markets especially when many companies produce the same kind of goods; decrease in supply of currency which limits the ability of people to buy; austerity measures under which the government limits its spending, and finally the deflationary spiral which catalyzes the situation once a country is experiencing deflation.