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What is deflation?
Classics 7
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9/7/2024
Learn the concept of deflation
Category
🛠️
Lifestyle
Transcript
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00:00
In this video, we will talk about deflation, a term you may have heard in economic discussions.
00:07
Deflation happens when the general level of prices for goods and services decreases.
00:12
This means that over time, your money can buy more.
00:16
While this might sound like a good thing, it can lead to serious economic challenges.
00:21
When prices fall, people and businesses might hold off on spending or investing because
00:26
they expect prices to drop further.
00:29
This can slow down economic activity.
00:32
With less demand for goods and services, companies make less money, which can lead to layoffs
00:37
and lower wages.
00:39
As unemployment rises, people have even less money to spend, which can deepen the cycle
00:45
of deflation.
00:47
Deflation can also affect borrowing and debt.
00:50
When prices fall, the value of debt increases in real terms, meaning it becomes harder to
00:55
pay off loans.
00:57
Businesses and individuals who are already in debt could struggle, making it even more
01:02
difficult for the economy to recover.
01:04
Governments and central banks usually try to avoid deflation by keeping inflation at
01:09
a stable and manageable level.
01:12
They may lower interest rates or introduce stimulus measures to encourage spending and
01:17
investment.
01:18
While inflation is often seen as a negative, a small amount is usually necessary to keep
01:24
the economy healthy and growing.
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