Question

Hi my name is Elena. I’m a general contractor. I took over the family business when my Dad retired. This inflation has made my job a lot harder. The price of materials keeps going up and up. My employees and sub-contractors keep costing me more and more. I have to overbid on contracts so that I do not lose money. I win some contracts but lose out on others. On the other side with inflation being so high people are building now instead of investing their money, so my company has several big contracts that we are working on.    

How is your individual affected by deflation?

Answer 1

Deflation is a situation when price level in an economy decreases. This is just opposite of inflationary stage, where price level increases.

Individuals (like employees and sub-contractors) may lose their jobs because of deflation. In this phase the money supply is low in the economy, which tends to slowing down the economy and makes the growth rate low (or sometimes negative). Since development works are stopped in this phase, people would be losing jobs and market doesn’t have any prospects in employment. This indicates a very high unemployment rate.