Investor Glossary-deflationInvestor Glossary-deflationInvestor Glossary-deflationInvestor Glossary-deflationInsightful stock market charts - Click here
investor
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

Deflation

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


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
©2004-2015 Investor Glossary - All rights reserved - Terms of Use