By deflation spiral one understands a vicious circle consisting of the following points:

1. sinking goods prices (deflation)
2. increasing purchase restraint on the part of the consumers (in expectation of far sinking prices).
3. sinking extent of utilization of the production capacities of the enterprises.
4. Further decline in prices (deflation) due to low extent of utilization.

Thus a deflation spiral v. A. leads to price decreases, income decreases and unemployment. Typical example of the consequences of a deflation spiral is Japan end of the 1990er, at the beginning of the 2000er years.

Articles in category "Deflation spiral"

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