Economic Ideas

Deflation Worries

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  1. Anonymous says:

    Deflation creates a vicious cycle. Because companies slow down their production, workers lose income, and then do not spend money on unnecessary goods. The economy falters, and people lose confidence in money’s value as prices continue to sink. Deflation affects people my age fairly directly. It may seem that people would spend more because prices are lower, but the opposite may happen. People will spend less because it seems that there will be no return on an investment. The Real Estate crash is an example of the consequences of over inflation and rubber stamped mortgages followed by an economic downturn and sudden worthlessness of previously highly liquid assets.

  2. Anonymous says:

    I agree, deflation only leads to worse things in the future. People begin to lose the motivation and confidence to buy products because they believe they will recieve nothing in return. People my age are directly affected.

  3. Anonymous says:

    Mira makes a very good point! I like her point about people our age. I think that right now, we don’t realize how we will be affected as we are living at home and being supported by our parents; however, it is important to realize that very soon we will be financially independent and more directly feeling the pain of deflation in our own wallets.

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