Is deflation good for a country's economy?

Answer 1

No! - Deflation is bad for an economy, and can cause a death spiral. Deflation means things are getting cheaper. So it discourages consumption: if things are getting cheaper, you will delay buying a product as long as possible, because you know you'll get a better deal if you wait...and wait ... and wait ... But when everyone does that, there is less demand for goods, and therefore less production, and so people are laid off > unemployment rises > now people have even less money > so demand falls even more > so more people are laid off ... pretty soon this cycle leads to the Great Depression of the 1930s.

It also discourages investing (money itself becomes more valuable over time than alternative investments, so therefore stuffing cash under your bed is the best investment); and it discourages lending because real interest rates will likely become negative (so a bank is better off leaving money in the vault than lending it out).

So deflation reduces consumption, lending, AND investment -- the result is bad for the economy in a million different ways.

Answer 2

I think it is bad for a country's economy because it can lead to
an increase in the unemployment rate.
In common usage deflation is generally considered to be "falling prices". But there is much more to it than that. Often people confuse deflation with disinflation or with Depression (as in "the Great Depression"). These three terms are related but not synonymous.

According to Investorwords.com the definition of Deflation is "a decline in general price levels, often caused by a reduction in the supply of money or credit. Deflation can also be brought about by direct contractions in spending, either in the form of a reduction in government spending, personal spending or investment spending. Deflation has often had the side effect of increasing unemployment in an economy, since the process often leads to a lower level of demand in the economy. The opposite of inflation.

Answer 3

Inflation and deflation don't have much affect in a single country. They only have an affect on a global issue when one country trades with another country. Deflation is good for a country's economy because they are able to import more goods with less money.

Answer 4

Deflation is usually the consequence of something bad. For example in Japan consumption is critically low, causing manufacturing to contract. With little demand prices fall.

Answer 5

It does have benefit's. Production in these countries is cheaper then those with stronger dollars. This helps the country profit from, exporting since other countries can get products cheaper from your country.

The down side is that it's harder to purchase imported goods. For exactly the opposite reason. The civilians money is weaker and products that were once produced for cheap overseas are now comparatively expensive.