deflation

noun
de·​fla·​tion | \ di-ˈflā-shən How to pronounce deflation (audio) , ˌdē- \

Definition of deflation

1 : an act or instance of deflating : the state of being deflated
2 : a contraction in the volume of available money or credit that results in a general decline in prices
3 : the erosion of soil by the wind

Keep scrolling for more

Other Words from deflation

deflationary \ di-​ˈflā-​shə-​ˌner-​ē How to pronounce deflationary (audio) , ˌdē-​ \ adjective

Examples of deflation in a Sentence

Economists worry that deflation will bring the country into recession.
Recent Examples on the Web Even some traditionally deflation-wary thinkers have begun pondering that outcome. Anchalee Worrachate, Bloomberg.com, "Fears Mount About Inflation Returning With a Vengeance," 10 May 2020 Falling prices might sound like a good thing, but economists agree that deflation would be very bad news. Eliza Mackintosh, CNN, "What you need to know about coronavirus on Wednesday, May 13," 13 May 2020 Andrew Davis were preparing to assist with stop sticks, a tire deflation device. Cameron Knight, Cincinnati.com, "Man charged in Springdale officer's death transferred to jail," 20 Apr. 2020 The Fed seeks inflation at that level as a cushion against deflation, a destabilizing drop in prices and wages. Washington Post, "Fed chair sees China virus as possible risk to world economy," 30 Jan. 2020 Lagarde declined to speculate on whether the eurozone was in danger of slipping into deflation, a ruinous downward spiral of prices and demand. Jack Ewing, BostonGlobe.com, "European Slump Is Worst Since World War II, Reports Show," 30 Apr. 2020 Japan’s central bank, for example, started amassing government bonds two decades ago to break the grip of deflation. Ben Holland, Bloomberg.com, "The Money Taboo That Central Banks Have Shied Away From So Far," 28 Apr. 2020 Officer Grant, a seven-year veteran of the department, was either preparing to throw, or had already thrown, a tire-deflation device on the highway, officials said. Kevin Grasha, Cincinnati.com, "Man to be charged in crash that killed Springdale police Officer Kaia Grant," 8 Apr. 2020 Private ballots, almost always more judicious, knocked 12% off his support last year and a similar deflation would get him over 60%, but not by much. Gabe Lacques, USA TODAY, "Baseball Hall of Fame: Roger Clemens seeks more gains in support as last-chance ballot nears," 15 Jan. 2020

These example sentences are selected automatically from various online news sources to reflect current usage of the word 'deflation.' Views expressed in the examples do not represent the opinion of Merriam-Webster or its editors. Send us feedback.

See More

First Known Use of deflation

1891, in the meaning defined at sense 1

Keep scrolling for more

Learn More about deflation

Time Traveler for deflation

Time Traveler

The first known use of deflation was in 1891

See more words from the same year

Statistics for deflation

Last Updated

2 Jun 2020

Cite this Entry

“Deflation.” Merriam-Webster.com Dictionary, Merriam-Webster, https://www.merriam-webster.com/dictionary/deflation. Accessed 2 Jun. 2020.

Keep scrolling for more

More Definitions for deflation

deflation

noun

Financial Definition of deflation

What It Is

Deflation describes the general decline in the prices of goods and services in an economy, which in turn increase the purchasing power of money. It is the opposite of inflation, but is not the same as disinflation (which is the slowing of inflation).

How It Works

Any way you slice it, deflation is caused by a significant drop in demand. Lots of things can cause this decrease in demand: recession, tighter monetary policy, civil unrest, terrorism, or changes in laws are common triggers. Many economists believe that these causes are often accompanied by a heavy psychological element. As consumers and companies grow more pessimistic about the economy or their standard of living, they tend to hoard cash instead of spending it. Likewise, banks tend to slow their lending and companies delay their expansion plans. These reductions in spending and lending lead to a decrease in the demand for goods and services. Less demand means producers, retailers, and other sellers of goods and services must lower their prices to entice buyers.

Although less expensive goods and services may seem like a good thing for consumers, it only marks the beginning of deflation's damaging downward spiral. The following sequence describes the dangers of deflation and the dangerous cycle it can create:

Why It Matters

Although many people laud lower across-the-board prices, prolonged periods of falling prices can wreak havoc on the economy by starting a downward economic spiral, resulting in fewer jobs, less income and a potential period of recession. Because the government can have such a tremendous impact on the economy in this vein, central banks like the Federal Reserve keep a close eye on economic measurements that will alert them of the threat of deflation.

Source: Investing Answers

deflation

noun
How to pronounce deflation (audio)

English Language Learners Definition of deflation

: a decrease in the amount of available money or credit in an economy that causes prices to go down
: the act or process of letting air or gas out of (something)

Keep scrolling for more

Comments on deflation

What made you want to look up deflation? Please tell us where you read or heard it (including the quote, if possible).

WORD OF THE DAY

See Definitions and Examples »

Get Word of the Day daily email!

Test Your Vocabulary

May 2020 Words of the Day Quiz

  • a blooming wisteria tree
  • Which is a synonym of exiguous?
Spell It

Can you spell these 10 commonly misspelled words?

TAKE THE QUIZ
Syn City

Test Your Knowledge - and learn some interesting things along the way.

TAKE THE QUIZ
Love words? Need even more definitions?

Subscribe to America's largest dictionary and get thousands more definitions and advanced search—ad free!