What does 'deflation' encompass?

Deflation refers to a decrease in the general price level of goods and services within an economy. This often occurs when there is a reduction in the money supply or credit, leading to lower demand for goods and services. As demand decreases, businesses may lower their prices to encourage consumers to buy, resulting in deflation. It can have various economic implications, such as increased real value of debt and reduced consumer spending, as people may delay purchases in anticipation of even lower prices in the future. Understanding deflation is crucial for comprehending its effects on economic growth and financial stability.