One problem with deflation is that it can raise the real value of debt.

Question

Quizplus · Accepted Answer

During deflation, the general price level of goods and services decreases, which means that the value of money increases. This can increase the real value of debt since the borrower has to repay the same amount of money with a greater purchasing power. It can become difficult for borrowers to repay their debts, leading to defaults and financial instability.

One Problem with Deflation Is That It Can Raise the Real