Deflation발음듣기
Deflation
Deflation is literally just a lowering of prices, or a general decrease in the level of prices for goods and services.발음듣기
Or another way to think about it, since inflation is an increase in the level of prices, you can just view it as negative inflation.발음듣기
And so, let's say we're the folks at the Bureau of Labor Statistics, and we're trying to compute the CPI index.발음듣기
And in one period - let's call this period one over here - we have our CPI index for urban consumers.발음듣기
And that basket of goods, let's say in period one - and this is a simplification - runs that urban consumer on average $100.발음듣기
Maybe we're adjusting certain things, maybe some products have become obsolete and we have to replace, or there has to be some adjustments for technology.발음듣기
But given that, assuming everything else is equal, that same basket of goods is now running at $98.발음듣기
And so the total cost of goods and services for this kind of average consumer has gone down by $2.발음듣기
Or we could say that we've experienced negative 2% inflation, which is really just another way of saying that we have experienced deflation.발음듣기
Now, deflation is not the norm, especially for growing economies, the way that our current economic systems runs, although it does happen.발음듣기
And the main reason why economists really don't like deflation - or I should say in particular, while central bankers really don't like deflation - is that it makes it much harder to control the economy or to fuel the economy with interest rates alone, or actually just with printing money alone.발음듣기
One thing I do want to make clear is although deflation isn't what we normally see in the broader economy as a whole, it does happen very frequently in specific sectors.발음듣기
We've all experienced buying a laptop at one period - so right now you buy the laptop for maybe $1,000 - and then six months later you see that exact same laptop for $500.발음듣기
And that's just because the rate of technological innovation is going so fast that they can produce the same amount of memory and processing power for a lot cheaper now.발음듣기
Or for the same amount of money you can get much more memory and processing power, and all of the rest.발음듣기
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