Deflation is harmful because it leads to decreased spending, rising inventories, job losses, and a decrease in GDP as companies can’t sell products at a profit, causing a deflationary spiral. As prices fall, companies struggle to sell goods at a profit, which can trigger a deflationary spiral. The Great Depression is the most well-known example, when sustained deflation deepened the economic collapse and prolonged recovery.
verifiedCite
While every effort has been made to follow citation style rules, there may be some discrepancies.
Please refer to the appropriate style manual or other sources if you have any questions.
Select Citation Style