Anyone who was around during the Carter and Ford Administrations remembers the economic term “inflation.” Its opposite, “deflation,” may be looming on the horizon now, according to Bryce Kanago, an economics professor at the University of Northern Iowa. He says deflation is when prices drop across-the-board, which may sound good, but it’s not. He says if all prices fall, then the things that are sold bring in less money, and wages go down.Kanago says people who’ve borrowed money will have to work harder to pay it back. He says another problem with deflation is that consumers often don’t spend when prices fall, as they’re waiting for the prices to drop further. He says both inflation and deflation cause economic problems.Kanago says there’s also a good possibility we may -not- see deflation as the general level of prices in the U-S is -not- falling, though prices are falling in several isolated areas.Kanago says during the Great Depression, there were huge drops in the money supply — a sure sign of deflation. He says that’s -not- happening today. He adds, not all deflation is bad — like in the computer industry, when new technology and productivity rise to push prices down.
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