Deflation:

Question

Deflation:

Quizplus · Accepted Answer

Deflation means a decrease in the general price level, which means that the value of money increases. Inflation, on the other hand, is a rise in the general price level, which means that the value of money decreases. If you are a borrower in a deflationary environment, you will have to repay your debts with dollars that have a greater purchasing power than they did when you borrowed the money. This makes it harder for borrowers to repay their debts, thus hurting them. For lenders, deflation increases the real value of the money they lent out initially, which makes it easier for them to be paid back. As a result, deflation tends to hurt borrowers and help lenders.