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'''Deflation''' is a reduction of the amount of amount of [[money]] in circulation.
'''Deflation''' is a reduction of the amount of amount of [[money]] in circulation.
When the cost of goods decreases over time, and thereby "deflate" in their prices. For example, deflation would exist when something that cost $1 last year then costs only 95 cents this year. The value of paper money (e.g., a dollar bill) may increase during deflation. Annual interest rates on savings can even become negative rather than the usual positive, as depositors may have to pay banks to safeguard the money.
When the cost of goods decreases over time, and thereby "deflate" in their prices. For example, deflation would exist when something that cost $1 last year then costs only 95 cents this year. The value of paper money (e.g., a [[dollar]] bill) may increase during deflation because of the shortage of dollars in circulation. Annual interest rates on savings can even become negative rather than the usual positive, as depositors may have to pay banks to safeguard the money.
Deflation is the opposite of [[inflation]], but liberals consider deflation to be worse. The [[Great Depression]], for example, was characterized by deflation. [[Japan]] has struggled with deflationary forces since the mid-1990s.<ref>http://www.japantimes.co.jp/opinion/2017/03/29/commentary/japan-commentary/the-truth-about-deflation/#.WV7wq-kpCUk</ref>
Deflation is the opposite of [[inflation]], but liberals consider deflation to be worse. The [[Great Depression]], for example, was characterized by deflation. [[Japan]] has struggled with deflationary forces since the mid-1990s.<ref>http://www.japantimes.co.jp/opinion/2017/03/29/commentary/japan-commentary/the-truth-about-deflation/#.WV7wq-kpCUk</ref>