Deflation occurs when the general price level of goods and services in an economy falls over time. It can be caused by a decrease in aggregate demand due to factors like a reduction in government spending, or by supply-side factors like technological advancements that lower production costs. The consequences of deflation include decreased consumer spending, increased real interest rates, declining profits and business failures, and undermined investment and innovation.

1. DEFLATION
PRADIPTA POUDEL
BIM V

2. INTRODUCTION
• Occurs when the general price level of
goods and services in an economy falls
over time
• One of the key cause is decrease in
demand for goods and services
• Can occur due to various factors such
as:
⚬ Decrease in aggregate demand
⚬ Reduction in government spending,
etc.

3. ⚬ DECREASE IN AGGREGATE DEMAND
CAN LEAD TO REDUCED SPENDING,
LOWER PRODUCTION LEVELS, AND
SUBSEQUENTLY, FALLING PRICES
⚬ It is caused due to various factors
such as:
￭ Economic downturn
￭ External shocks, etc.
Demand Deflation

4. ⚬ TECHNOLOGICAL ADVANCEMENTS,
IMPROVED PRODUCTIVITY, OR
INCREASED COMPETITION CAN
LOWER PRODUCTION COSTS,
LEADING TO PRICE REDUCTIONS
⚬ It is caused by different factors such
as:
￭ Technological Advancements
￭ Increased Competitions
Supply Deflation

5. CONSEQUENCES
Decreased Consumer Spending
Increased Real Interest Rates
Declining Profit and Business Failure
Undermined Investment and Innovation
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6. CONCLUSION
• Observed the concept of deflation in an
economy
• The consequences of deflation are crucial for
understanding the current economic situation

7. THANK YOU