Deflation 1st Cast (Intro & Definition) What is deflation and how does it affect the economy? In short, it's "negative inflation"; a general decline in the prices of goods and services, meaning your money's purchasing power increases. While your money gaining value sounds great on paper, it's actually a massive, hidden threat to the macroeconomy. But why? 2nd Cast (Causes) Deflation generally has two main triggers: Drop in Demand: High interest rates and consumer pessimism about the future (recession fears) push people to save their money rather than spend it. Increase in Supply: Falling raw material costs and tech advancements make production cheaper. Even if demand stays flat, the market floods with goods, forcing prices down. 3rd Cast (Effects & The Spiral) The Devastating Effects: • Unemployment: Companies lay off workers to cut costs in the face of falling prices. • Debt Burden: The real value of debt increases, making repayment much harder.