Why are economists concerned about deflation?

Question

Quizplus · Accepted Answer

Economists are concerned about deflation because it could cause credit markets to freeze up, which in turn could cause economic growth to stop. Deflation can lead to a vicious cycle where consumers delay purchases in anticipation of lower prices, leading to decreased demand, lower prices, and potentially even lower demand. This can lead to reduced economic activity and can cause businesses to cut back on investment and hiring, leading to higher unemployment rates. Additionally, deflation can increase the real burden of debt, which can make it more difficult for individuals and businesses to meet their debt obligations.

Why Are Economists Concerned About Deflation