WEBVTT

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when the prices of goods and services go

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down

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we have deflation lower prices may seem

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like a blessing but deflation is

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actually a curse because it generates a

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vicious circle if prices go down the

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profits of businesses tend to go down

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with them and the economy suffers a lot

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of people therefore either lose their

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jobs or have to accept lower wages and

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what do people do when they have less

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money they consume less what happens if

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people consume less there's less demand

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for goods and services and once the

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consequence of reduced demand you've

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guessed an even bigger deflation problem

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but camp those who haven't lost their

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jobs or had a decrease in income spend

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more to compensate while they could

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that's probably not going to happen why

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for the simple reason that seeing your

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neighbor faced financial difficulties

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makes you more pessimistic as well and

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therefore even those who haven't yet

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suffered income or job loss will become

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more cautious and consume less there you

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have it vicious circles 101