1 A reduction in AGGREGATE DEMAND. A deflationary policy of extra taxation and lower public expenditure is chosen by governments to correct balance of payments deficits and to lower the price level. 2 A fall in the average price level. 3 The...

Contraction in the volume of available money or credit that results in a general decline in prices. A less extreme condition is known as disinflation. Attempts are sometimes made to bring on deflation (through raising interest rates and tightening the...

see inflation and...

Deflation is the opposite of inflation. Deflation is the loss of money in the available money supply. For economists especially, the term has been and is sometimes used to refer to a decrease in the size of the money supply (as a proximate cause of the...