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What would be SO bad about deflation?
If anything, wouldn't that be better for economy?? because then people would start sepending again because things will be cheaper!
What are the chances we will have deflation?
THANX in advance!
2 Answers
- Anonymous1 decade agoFavorite Answer
No.
Steadily rising prices is a good thing because it encourages people to buy goods before the price goes up. If prices were to fall, there would be the opposite. People would put off buying, for example, a new car, if they were expecting the price to go down.
Clearly this would be bad for the economy as it would actually discourage people from spending money as they wait for goods to get even cheaper, rather than rush out and buy things.
That is why (well in the UK anyway) the target rate of inflation is 2% - if people are expecting the price of that car to go up then they will buy it now, rather than wait.
- RandyLv 41 decade ago
With falling prices soon will come falling wages. A deflationary recession is far worse than an inflationary recession (stagflation).
