Definition of the word deflation

The word "deflation" originates from the Latin words "de" meaning "down" and "flatere" meaning "to blow". In the 15th century, "deflation" referred to the act of blowing something down or extinguishing a flame. In the context of economics, the term was first used in the 1930s to describe a decrease in the overall general price level of goods and services in an economy. This is often caused by a reduction in the money supply, a decrease in aggregate demand, or a combination of both. In essence, deflation is the opposite of inflation, where prices rise. The concept of deflation was first introduced by economists such as Irving Fisher and John Maynard Keynes to describe the economic scenario where prices are decreasing. Since then, the term has become a crucial concept in macroeconomics and monetary policy.