Deflation definition investopedia. Deflation is a fall in the overall level of prices in an economy and an increase in the purchasing power of the currency. It can be driven by an increase in productivity and the abundance of goods. Deflation is a less common occurrence than inflation. It also occurs when a lower level of demand in the economy leads to an excessive drop.
It can reflect a glut of goods or services on the market. The increase in the purchasing power of the currency is generally related to limitations in the money supply due to economic stagnation or limited available credit. For this reason the nominal purchase price of goods may decline while the relative purchase price remains the same. Deflation is an economic condition where the price of goods services and labor declines because of the increase in the purchasing power of the nations currency.
Borrowers will typically experience decreasing property values from debt deflation. Deflation is the general decline of the price level of goods and services.