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


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