china deflation decreasing inflation level reached dangerous situation mdn
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What is deflation?
Deflation is an economic condition in which the monetary standard is low. That means in simple words inflation reduces. Criteria here means monetary value or lack of monetary value at normal level. In other words, deflation involves a fall in monetary values and an increase in the purchasing power of money. As a result of deflation, businesses lose profits, production is severely reduced, and unemployment may increase. It is an economic issue that governments experience to face, and they need to formulate and implement economic policies in such times so that the economic situation can improve.
There can be many reasons for deflation.
1. Weak Economic Activities: If a country’s economic activities are weak, people spend less and trade decreases, which can lead to a decrease in monetary values.
2. Decrease in production: Decrease in production can also be a reason, because it reduces the exchange available in the market and can lead to decrease in demand for textiles, general wear, and services.
3. Decrease in interest rates: If interest rates are too high, people may be tempted to borrow money and may have less money to spend, which can also lead to a decrease in monetary values.
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