Deflationary

Deflationary describes economic policies, conditions, or forces that lead to a decrease in the general price level of goods and services within an economy, or that actively seek to curb or counteract inflation. It's the opposite of inflationary and often involves reduced consumer spending, declining business investment, and lower demand. These forces typically increase the purchasing power of money but can also lead to economic stagnation or recession if prices fall too rapidly or for extended periods, discouraging investment and hiring. It is often considered a more dangerous economic state than moderate inflation.

Deflationary meaning with examples

• The central bank implemented deflationary measures, including raising interest rates and reducing the money supply, to combat rising inflation and cool down the overheated economy. These actions were designed to curtail borrowing and spending.
• A sustained period of low consumer spending and declining business investment created deflationary pressures, forcing businesses to lower prices and cut production in order to stimulate demand. The slow down impacted economic growth significantly.
• Economists debated whether the government's proposed fiscal policies would be deflationary or inflationary, considering the potential impact on aggregate demand. They argued the measures should avoid price shocks.
• Technological advancements leading to lower production costs can exert deflationary effects on the market by creating an abundance of supply. This increased efficiency lowered consumer prices in turn.
• Companies are often at risk of falling prices, forcing difficult decisions. When facing a potential economic downturn, a deflationary spiral may ensue, with price drops, reduced consumer spending, and business failures.