Blog
Some reading on deflation
27th November 2008
Deflation is a period when the general price level falls i.e. the cost of a basket of goods and services is actually becoming less expensive. It is normally associated with falling level of AD leading to a negative output gap where actual GDP < potential GDP. But deflation can also be caused by an increase in a nation’s productive potential which leads to an excess of aggregate supply over demand.
My AS economists have been writing about deflation this week. Here is a selection of recent articles on price deflation that considered some of the issues involved:
Independent: Why buy now if prices are plummeting? How deflation could drag us all down
Reuters: What is deflation and why is it feared?
Belfast Telegraph: Deflation is the enemy of growth and prosperity
Geoff Riley
Geoff Riley FRSA has been teaching Economics for over thirty years. He has over twenty years experience as Head of Economics at leading schools. He writes extensively and is a contributor and presenter on CPD conferences in the UK and overseas.