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How does deflation improve competitiveness?

Hi,

How does deflation improve international competitiveness?

Thanks :smile:
I always though deflation was bad as it's money losing actaul value. I mean I suppose you could argue that it's easier for foreign competitors to enter certain markets where deflation has happened but prices going down is bad. I know many people confuse lowering inflation with actual deflation.
Original post by Guru Jason
I always though deflation was bad as it's money losing actaul value. I mean I suppose you could argue that it's easier for foreign competitors to enter certain markets where deflation has happened but prices going down is bad. I know many people confuse lowering inflation with actual deflation.


Thanks for your response :smile:
Hi Sophie.

Deflation is a sustained and general decrease in the overall price level in that country.

If this happens, it means costs of productions have decreased, making the countries exports much cheaper to purchase (Quantity demand for their exports increases).

This makes the countries exports more competitive. This is because among the countries competitors, its price has fallen and thus making it more competitive.

Basically what happens if the general price level in the country decreases? Prices of that countrys goods and services. The exports obviously can be priced lower, increasing the competitiveness. Ive not studied A level Econ in a few years.
(edited 4 years ago)
Original post by tHe237046
Hi Sophie.

Deflation is a sustained and general decrease in the overall price level in that country.

If this happens, it means costs of productions have decreased, making the countries exports much cheaper to purchase (Quantity demand for their exports increases).

This makes the countries exports more competitive. This is because among the countries competitors, its price has fallen and thus making it more competitive.

Basically what happens if the general price level in the country decreases? Prices of that countrys goods and services. The exports obviously can be priced lower, increasing the competitiveness. Ive not studied A level Econ in a few years.


Thank-you for your response :smile:
Original post by SophieMay16
Thank-you for your response :smile:

Also makes investors more likely to attract due to lower prices, increasing competitiveness.

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