Deflation

In economics, deflation is a sustained decrease in the general price level of goods and services.Deflation occurs when the annual inflation rate falls below zero percent, resulting in an increase in the real value of money — a negative inflation rate. This should not be confused with disinflation, a slow-down in the inflation rate (i.e. when the inflation decreases, but still remains positive). Inflation reduces the real value of money over time, conversely, deflation increases the real value of money.
Currently, mainstream economists generally believe that deflation is a problem in a modern economy because of the danger of a deflationary spiral. Deflation is also linked with recessions and with the Great Depression. Additionally, deflation also prevents monetary policy from stabilizing the economy because of a mechanism called the liquidity trap. However, historically not all episodes of deflation correspond with periods of poor economic growth.
In economics, deflation refers to a general reduction in the level of prices below zero percent year-on-year inflation. Deflation should not be confused with a temporary fall in prices; instead, it is a sustained fall in prices that occurs when the inflation rate passes down below zero percent.
Since this idles capacity, investment also falls, leading to further reductions in aggregate demand. This is the deflationary spiral. An answer to falling aggregate demand is stimulus, either from the central bank, by expanding the money supply or by the fiscal authority to increase demand, and to borrow at interest rates which are below those available to private entities.