Deflation is a decrease in the general level of prices in an economy, or the act of letting air or gas out of something so it shrinks.
It comes from “deflate,” from Latin “deflare,” meaning “to blow away,” from “de-” (down, away) and “flare” (to blow). The economic sense developed in the 20th century, based on the idea of prices “shrinking” like a deflated balloon.
People often think falling prices are always good, but long‑term deflation can freeze an economy—everyone waits for things to get even cheaper. The same image fits both meanings: whether it’s a balloon or a market, losing pressure changes how everything behaves.
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