Deflation is a decrease in the general price level of goods and services. It occurs when the supply of money in an economy decreases relative to the demand for goods and services, resulting in a fall in prices.

Deflation can be caused by a variety of factors, including a decrease in the money supply, an increase in the supply of goods and services, and a decrease in the demand for goods and services. Deflation can have negative consequences for an economy, as it can lead to a decrease in demand and spending, which can in turn lead to a decline in economic activity.

Deflation is the opposite of inflation, which is an increase in the general price level of goods and services. Central banks generally try to maintain a moderate level of inflation in order to stimulate economic growth and prevent deflation.

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