Deflation is an economic condition characterized by a decrease in the general price level of goods and services. This often occurs when there is a reduction in the supply of money or credit, leading to lower consumer spending and investment. As prices fall, consumers may delay purchases in anticipation of even lower prices, which can further exacerbate the economic downturn. The effects of deflation can be severe, leading to increased unemployment and reduced economic growth. Central banks, such as the Federal Reserve, may respond to deflation by implementing policies aimed at increasing the money supply to stimulate spending and investment, thereby countering the negative impacts of falling prices.