Deflation

In contrast to inflation, deflation is that rare economic condition when prices of goods and services fall due a lack of demand. The last time large scale deflation occurred was when the U.S. economy practically came to a halt during the Great Depression in the 1930s. There can be a domino effect from falling prices – factories shut down because of declining profits, more and more people are laid off, household incomes shrink, and companies and individuals default on their loans. In a more recent example, falling housing prices have put pressure on many homeowners--forcing them into distressed sales which creates even further downward pressure on property prices and other asset values.