long term benifits to business from deflation

[yogendra]

hai can any know the long term benifits to business from deflation.

[Baron Max]

Sounds like a homework problem ...and not many people here are willing to do homework problems for other people.

Baron Max

[Nikelodeon]

hai can any know the long term benifits to business from deflation.
Mass suicide.

[Absane]

benEfits.

[Roman]

hai can any know the long term benifits to business from deflation.

Deflation means your money will be worth more in the future, which makes investment spending less attractive. Better to save your money until it's worth more.

[Fraggle Rocker]

This is a challenging assignment. Periods of deflation are usually short-term. I don't know if there has ever been a long enough period of deflation for any long-terms benefits to have been observed. In the short term the effects of deflation are generally not beneficial.

There have been periods of deflation in which the economy prospered, such as the late 19th century in the USA. That lasted about 25 years, possibly the longest period of deflation that has ever occurred. But in that case the prosperity was in spite of the deflation, not because of it. Nonetheless you should study this period because there aren't many like it. Perhaps you will achieve an understanding that was not possible for me.

The deflation of that period was caused by a hard money policy (gold standard) which restricted the supply of money because of the speed with which new gold can be mined. Hard money is out of vogue. If you've been asked to answer this question in the context of a contemporary economy, the post-Civil War decades may not prove very useful.

I've got a degree in business, I have an interest in economics and have studied it, and I just read the entire Wikipedia article on deflation. (Something I hope you did before you came to us. :)) And I still can't identify a single benefit.

Good luck!

[s0meguy]

Early 19's (i think the cause of it was the 29 crash, but not sure) all countries in Europe but the Netherlands inflated their currency, which effectively deflated the Dutch currency. Exports dropped to almost zero and the employment rate fell waaaaay down.