Deflation is an economic phenomenon characterized by a general decline in prices for goods and services. Unlike inflation, where prices rise, deflation can lead to a decrease in consumer spending ...

However, under certain circumstances, rapid deflation can be associated with a short-term contraction of economic activity. In general, this can occur when an economy is heavily laden with debt ...

The second graph, in which the slope of the line actually becomes negative, illustrates a period of deflation. Recessions (or more minor economic contractions) can also lead to disinflation as ...