Answer:
1) Demand for goods declines
2) Salaries declines
3) Bank loans reduces
4) Buyers' losses increase
5) Wages declines, debts increases
6) Interest rates go to zero
7) Business profits decrease
8) Unemployment increases
Explanation:
There are always reasons to beware of deflation. These are:
1) While consumers are not in a hurry to buy goods in the prospect of falling prices, there is a delay in demand, and demand for goods declines. In addition, prices are falling in response to a declining student.
2) Salary projections are also declining, and consumers are more likely to save than spend money. For example, 70% of US economic growth is based on consumption, which could lead to overall GDP decline in the country.
3) The volume of bank loans is also reduced, as repayment of interest rates that are larger than the loans themselves is not beneficial to the borrower.
4) Buyers are subject to a loss of value over time as the value of the goods they purchase.
5) The higher the debt of the borrower, the worse it is: during deflation, wages are reduced, and debt remains the same.
6) During inflation there is no upper limit of interest rates, and in deflation they go to zero. Banks do not offer 0% credit, and when rates are above zero, banks make money, but borrowers have to make losses here.
7) Companies' profits also decrease during deflation, which results in lower securities prices. This worries private investors who want to keep their profits out of dividends.
8) Unemployment increases while companies' struggles to make a profit, and their wages decrease. These processes have a negative impact on the economy as a whole.
