Learn the concept of deflation
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LifestyleTranscript
00:00In this video, we will talk about deflation, a term you may have heard in economic discussions.
00:07Deflation happens when the general level of prices for goods and services decreases.
00:12This means that over time, your money can buy more.
00:16While this might sound like a good thing, it can lead to serious economic challenges.
00:21When prices fall, people and businesses might hold off on spending or investing because
00:26they expect prices to drop further.
00:29This can slow down economic activity.
00:32With less demand for goods and services, companies make less money, which can lead to layoffs
00:37and lower wages.
00:39As unemployment rises, people have even less money to spend, which can deepen the cycle
00:45of deflation.
00:47Deflation can also affect borrowing and debt.
00:50When prices fall, the value of debt increases in real terms, meaning it becomes harder to
00:55pay off loans.
00:57Businesses and individuals who are already in debt could struggle, making it even more
01:02difficult for the economy to recover.
01:04Governments and central banks usually try to avoid deflation by keeping inflation at
01:09a stable and manageable level.
01:12They may lower interest rates or introduce stimulus measures to encourage spending and
01:17investment.
01:18While inflation is often seen as a negative, a small amount is usually necessary to keep
01:24the economy healthy and growing.