Sunday, February 8, 2015

More on Deflation

Bloomberg provides an article on the "The Eight Unlucky Countries Facing Deflation This Year".  Deflation is a scary proposition for the ECB, or the Federal Reserve. However, in another article, "Deflation: Is It Really a Bad Thing?", it makes an argument that deflation is a good thing for the economy.

Since deflation represents falling prices, with respect to the money supply, this can be a good thing for consumers. As per the Law of Demand, as the prices of the good drops, the demand for that good increases. Consumers are able to purchase items, that were previously at higher prices, at lower prices.

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