Understanding Deflation and Its Consequences

The video tutorial explains deflation, its causes, and its effects on the economy. Deflation can occur due to a shift in the AD curve, leading to bad deflation with reduced real output and employment, or a shift in the SRS curve, resulting in good deflation with increased real output. Persistent deflation can have severe consequences, such as reduced consumption and investment, as seen in Japan. It also affects debt, increasing its real value, and impacts borrowers and savers differently.

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