Deflation Example: The Great Depression of the 1930s

One striking example of deflation is the Great Depression of the 1930s. This period witnessed a dramatic decline in the general price level of goods and services across the economy. This deflationary spiral was primarily triggered by a decrease in aggregate demand. As people spent less, businesses invested less, and overall economic activity dwindled, prices plummeted. Consequently, unemployment soared, and businesses and financial institutions faced immense challenges. To combat deflation and revive economic growth, central banks and governments implemented various measures, such as monetary expansion and fiscal policies.