Question

In the business cycle, when is "deflation" most likely to occur?

Answer 1

In economics, deflation is a decrease in the general price level of goods and services.
deflation is caused by a shift in the supply and demand curve for goods and services, particularly a fall in the aggregate level of demand. That is, there is a fall in how much the whole economy is willing to buy, and the going price for goods. Because the price of goods is falling, consumers have an incentive to delay purchases and consumption until prices fall further, which in turn reduces overall economic activity. Since this idles the productive capacity, investment also falls, leading to further reductions in aggregate demand.