Simple English definitions for legal terms
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Deflation: When the prices of things go down, it's called deflation. This means that you can buy more things for less money. It's the opposite of inflation, which is when prices go up.
Definition: Deflation is a situation where the general price of goods and services decreases. It is the opposite of inflation, where prices increase. Deflation can happen when there is a decrease in demand for goods and services, or when there is an increase in the supply of goods and services.
Example: During the Great Depression in the 1930s, there was a significant deflationary period in the United States. Prices of goods and services fell, and people had less money to spend. This led to a decrease in demand for goods and services, which further decreased prices.
Explanation: The example illustrates how deflation can lead to a decrease in demand for goods and services. When prices fall, people tend to hold onto their money, hoping that prices will fall further. This leads to a decrease in demand, which further decreases prices. This cycle can continue until the economy reaches a state of equilibrium.