deflation

Deflation is a general dip in prices, often caused by a reduction in the supply of money or credit. It occurs when the inflation rate falls below 0% (a negative inflation rate).

Deflation can also happen due to a decrease in government, personal or investment spending. Since there is a lower level of demand in the economy, which can lead to an economic depression, deflation has the side effect of increased unemployment.

Central banks seek to restrain severe deflation, just as severe inflation, in an attempt to keep the excessive drop in prices to a minimum.