Final answer:
The condition described, where prices are declining due to a banking system collapse, is known as deflation. It is typically a consequence of a significant drop in aggregate demand, leading to a deep recession.
Step-by-step explanation:
The condition where prices are declining due to a collapse in the national banking system, as happened in Lasia, is known as deflation. This situation typically arises when there is a significant drop in aggregate demand, which is the total demand for goods and services within an economy. When investors withdraw their money and a currency's value falls, the banking system may find it difficult to repay foreign denominated debts, leading to a banking crisis. The lack of available credit and lending exacerbates the decline in demand, causing prices to fall and leading to a deep recession.