Investor Glossary-deflationInvestor Glossary-deflationInvestor Glossary-deflationInvestor Glossary-deflationInsightful stock market charts - Click here
Categories    # A B C D E F G H I J K L M N O P Q R S T U V W X Y Z


The HTML to link to this page

Deflation is a broad decline in prices. Deflation occurs when the prevailing demand cannot absorb the supply of goods. Companies attempt to stimulate demand by cutting prices, which in turn may lead to cost-cutting wage reductions. The reduction in purchasing power further reduces demand. During periods of deflation cash is often considered 'king' as goods and services are losing value.
Prior to the Bretton Woods Agreement and the elimination of the gold standard, periods of deflation were fairly common. The US economy, for example, endured fourteen consecutive years of deflation in the mid-1800s. Deflation during the 1930s reached a staggering 30% over a four year period. The replacement of asset-backed currencies with paper currencies backed by the "full faith and credit" of governments has significantly reduced the appearance of deflation as their is little impediment to printing more currency. Following the Bretton Woods agreement, the US economy experienced deflation only twice in 60 years. The extended Japanese economic slump of the 1990s, however, demonstrated that deflation remains a concern.

Rate this deflation definition...

Learn about investing with the Investor Glossary Term of the Day

Click here for insightful stock market charts. Where is the market headed? The answer may surprise you. Find out
with the exclusive & Barron's recommended charts of Chart of the Day.

Popular Terms: APR, required rate of return, in escrow, per diem, stock split, cancelled check, labor relations, liquidity ratio, inflation, 401a, limit order, risk management, Key Rate Duration, retained earnings, FICO score, quality assurance, 144a, real GDP, command economy, dividends payable, deferred revenue, class C shares, stock market close, deferred tax, balance sheet, reverse mortgage, phantom income, ex-dividend, option premium, LIBOR, annual return, debt service coverage, open position, 1035 exchange, current ratio, EBITDA, implied volatility, average price per share, wholly-owned subsidiary, Zero Cost Collar, irrevocable trust, ex-dividend date, FTSE, diluted share, covered put, minority interest, VIX, 1031 exchange, margin rate

Accounting | Banking | Bonds | Brokers | Economy | Futures | Mutual Funds | Options | Real Estate | Retirement | Stocks | Taxes | Technical Analysis
Investor Glossary | Term of the Day | Suggest a Term | Chart of the Day | Dogs of the Dow
©2004-2016 Investor Glossary - All rights reserved - Terms of Use