What is deflation & how deflation affects your investments?

by Mohan Bhupathiraju on January 25, 2012
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A simple definition of economics would define deflation as a situation where the prices of goods and services fall during a particular period of time. Mathematical interpretations would mean that deflation is a situation where the inflation level falls below 0%. However one should not confuse this term with disinflation which is a situation where there is a slowdown of the inflation rates. As we know that inflation reduces the value of money over a period of time conversely deflation increases the real value of money. It means that one can buy more goods at the same amount of spending that they used to do previously.

What are the causes of deflation?

There are several reasons which could lead to a deflation scenario in an economy. But two of the most accepted reasons by the economists are: [click to continue…]

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