Deflation is a decrease in prices for goods and services over time, typically associated with a contraction in the supply of money and credit in the economy

. It is the opposite of inflation and can be caused by various factors, such as an increase in productivity, a decrease in overall demand, or a decrease in the supply of money and credit

. Deflation can have both positive and negative effects on the economy:

• Positive effects : Deflation can increase the purchasing power of consumers, allowing them to buy more goods and services with the same nominal amount of money

. It can also encourage consumer spending, as people can afford more with their existing funds

• Negative effects : Deflation can be a sign of a weak economy, as it may indicate a decrease in demand for goods and services, leading to layoffs and reduced business investment

. It can also lead to a decline in asset prices, such as stocks and real estate, as people may not be able to afford them with their reduced purchasing power

. In extreme cases, deflation can spiral into a downward cycle of decreasing prices and economic contraction, potentially leading to a depression

Deflation is measured using economic indicators like the consumer price index (CPI), which tracks the prices of a group of commonly purchased goods and services

. While a slight decrease in prices may spur consumer spending, broad deflation can discourage spending and lead to even greater deflation and economic downturns