185k views
2 votes
Why will producers and suppliers have a surplus of goods during a time of deflation?

User RedHatcc
by
7.8k points

1 Answer

1 vote
The answer to this question is Consumers have too little money.
in short-term, deflation may cause an increase in purchasing power because of the decrease in price. While this may look good for consumers in the beginning, companies will start to slashing employees to match the decrease in price and caused massive unemployment, which eventually leads to the situation where consumers have too little money
User Martonx
by
8.6k points