Deflation

Deflation in economics refers to a decrease in the cost of goods and services. Hence, it is an opposite to inflation. it is generally regarded as a bad thing in that it is usually a symptom of a depression or severe recession. In a deflationary situation, people tend not to spend money because they are expecting prices to drop, which causes factories to close, which causes prices to drop, which causes people not to spend money. Also deflation causes people to hold into cash rather to invest the money.

Examples of deflation include the Great depression and the economy of Japan during the 1990's.