Year 12 Recap - Deflation
This Year 12 Recap video covers the basics around the topic of deflation.
Many would perceive that falling prices would boost an economy as the real incomes of consumers will surge. However, the interesting debating point amongst economists is that if a country experiences protracted spells of deflation then it may negatively hit spending and growth as consumers delay their purchases in anticipation of further price cuts. Therefore, students need to be armed with both sides of the deflation argument when going into an exam question surrounding inflation/deflation, as this represents an opportunistic moment to earn crucial evaluation marks.
Deflation is when the inflation rate in a country turns negative and prices across the economy are actually falling over time. The video breaks down the impact of deflation on economic agents across the economy as well as depicting the causes of deflation via an AD/AS diagram.
Here Jacob guides you around the topic of deflation:
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