Definition
- Deflation
- Deflation occurs when the rate of inflation is negative, so money has more purchasing power over time rather than less.
- Not to be confused with: Disinflation
- Disinflation is a decline in the rate of inflation, while prices are still rising.
Test yourself
What is the difference between deflation and disinflation?
Under deflation the price level falls; under disinflation it still rises, only more slowly.