DEFLATION

It is a major decline in prices usually caused by some reduction in supply of money or in credit. It can also be caused by decrease in government or investment spending. The opposite of inflation, deflation has the side effect of increased unemployment since there is a lower level of demand in the economy, which can lead to an economic depression. Central banks attempt to stop severe deflation, along with severe inflation, in an attempt to keep the excessive drop in prices to a minimum.