Deflation is a sustained decrease in the general price level of goods and services. Though from a consumers point of view it sounds very nice but it may not prove to be a healthy sign for the economy. It is generally associated with a fall in aggregate demand. In economics, deflation refers to a general reduction in the level of prices below zero percent year-on-year inflation. Deflation should not be confused with a temporary fall in prices; instead, it is a sustained fall in prices that occurs when the inflation rate passes down below zero percent. Deflation is now the greatest concern for the world economy. Over the past year, producer prices have fallen throughout the advanced world; consumer prices have been falling for the last 6 months in France and Germany; in Japan wages have actually fallen 4 percent over the past year. This phenomenon is being seen all across the globe. The worksheet presented here helps the students to take an insight into this phenomenon and find out how it affects different groups of people. Click on the printer icon to print this worksheet.

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