Deflation describes a sustained fall in the general price level across an economy.
When deflation occurs, a broad measure of prices declines rather than merely rising more slowly. The result can increase the real burden of debts because borrowers must repay fixed amounts with money that buys more goods and services. Consumers may also postpone purchases if they expect prices to fall further, potentially reducing demand.
Deflation differs from disinflation. Disinflation means that inflation is still positive but has slowed; for example, a fall from 6% annual inflation to 3% is disinflation, not deflation. Deflation also differs from a price decline in one product, such as cheaper computers, because the term concerns the overall price level.
The Great Depression included substantial deflation in many countries. Modern central banks generally try to avoid persistent deflation because it can interact with falling demand, unemployment, defaults, and financial stress.