Editing Deflation (section)

==Deflationary spiral==

A ''deflationary spiral'' is a situation where decreases in the price level lead to lower production, which in turn leads to lower wages and demand, which leads to further decreases in the price level.<ref>{{Cite web|url=http://web.mit.edu/krugman/www/spiral.html|title=DEFLATIONARY SPIRALS|website=web.mit.edu}}</ref><ref name="academia.edu">Grinin, L. E., & Korotayev, A. V. (2018). [https://www.academia.edu/36117858/The_Future_of_the_Global_Economy_in_the_Light_of_Inflationary_and_Deflationary_Trends_and_Long_Cycles_Theory The future of the global economy in the light of inflationary and deflationary trends and long cycles theory. ''World Futures'', 74(2), 84-103] {{Webarchive|url=https://web.archive.org/web/20201112025952/https://www.academia.edu/36117858/The_Future_of_the_Global_Economy_in_the_Light_of_Inflationary_and_Deflationary_Trends_and_Long_Cycles_Theory |date=2020-11-12 }}.</ref> Since reductions in general price level are called deflation, a deflationary spiral occurs when reductions in price lead to a [[virtuous circle and vicious circle|vicious circle]], where a problem exacerbates its own cause.<ref>{{cite web |last1=Kagan |first1=Julia |title=Deflationary Spiral |url=https://www.investopedia.com/terms/d/deflationary-spiral.asp |website=Investopedia |access-date=20 March 2021 |language=en}}</ref> In science, this effect is also known as a [[positive feedback]] loop. Another economic example of this situation in economics is the [[bank run]].

The [[Great Depression]] was regarded by some as a deflationary spiral.<ref>{{cite news|url=http://www.economist.com/economics-a-to-z/d#node-21529653|title=Economics A-Z terms beginning with D|newspaper=The Economist}}</ref> A deflationary spiral is the modern [[macroeconomic]] version of the [[general glut]] controversy of the 19th century. Another related idea is [[Irving Fisher]]'s theory that [[Debt deflation|excess debt can cause a continuing deflation]].