deflation Flashcards
1
Q
deflation definition
A
the sustained fall in the general price level over time
2
Q
when did UK experience deflation
A
April 2015 - prices fell by 0.1%
3
Q
deflation effect on spending
A
discourages spending as it makes goods and services cheaper in the future - if cheaper in future they won’t spend today
4
Q
effect on unemployment
A
increases rate of unemployment - causing economic decline
5
Q
effect on debt
A
makes the real value of debt higher - means consumers with high level of debt find it harder to pay it off - as larger proportion income used for repayments
6
Q
effect on disposable income
A
have less disposable income - spending level in the economy falls - worsens the effects of a recession - wages likely to fall - as firms have lower profits
