What is deflation?
Q: What is deflation?
A: Deflation is when the prices of products generally go down, and it is the opposite of inflation.
Q: Why is deflation a sign of a weak economy?
A: Deflation usually happens during an economic collapse, so it can be seen as a sign that the country's economy is in a weak state.
Q: How does deflation start?
A: Deflation starts when people are waiting for prices to go down even more, so they spend less money. This causes companies to lower their amount of goods made and fire workers in order to make even a small profit.
Q: Is there ever deflation when an economy is growing?
A: Yes, if the amount of money going around grows slower than the making of goods, then there can still be some amount of deflation.
Q: When was the last time there was much deflation in the world?
A: The last time there was much deflation in the world was since 1930s except for Japan.
Q: How can governments help with deflation?
A: Governments can help with deflation by lowering companies' tax levels so they can lower their prices while getting same profit. This encourages people to buy cheaper goods which helps companies make more profits slowly.
Q: Why don't governments like deflation?
A: Governments don't like deflation because it means that they collect less tax revenue from businesses and individuals.
