Deflation | Inflation | Finance & Capital Markets | Khan Academy

Basics of deflation. Created by Sal Khan.

Watch the next lesson:

Finance and capital markets on Khan Academy: Prices don't always go up. They often go down. This might seem like a good thing, but it could be disastrous for a modern economy is it goes too far. This tutorial explains what deflation is, how it happens and what the effects of it might be.

About Khan Academy: Khan Academy offers practice exercises, instructional videos, and a personalized learning dashboard that empower learners to study at their own pace in and outside of the classroom. We tackle math, science, computer programming, history, art history, economics, and more. Our math missions guide learners from kindergarten to calculus using state-of-the-art, adaptive technology that identifies strengths and learning gaps. We've also partnered with institutions like NASA, The Museum of Modern Art, The California Academy of Sciences, and MIT to offer specialized content.

For free. For everyone. Forever. #YouCanLearnAnything

[Takeonm]

Recent current events have brought me back here to refresh after all these years. Your old videos are gold!

[Baqqus]

Yes it does. The CPI has a -(food & energy) index, but economists believe these commodities are volatile, so they don't count them usually. The CPI also produces an index that includes food & energy.

[rcdny]

@funnybleh we dont live in utopia. we have a finite amount of resources. when you say "shortcomings" of the free market..."shortcomings" compared to what other system? central planning?
the depressed state of economic activity will continue until govt stops interfering in the economy

[funnybleh]

@rcdny We still have nation states. Ignoring them for a minute, and if we exclude government from the world economy, what kind of adjustment period do you think would be needed before things settled down? Would it be easy or difficult for the average man in the street? My statement about predicting things had to do with making policy choices. Your policy choice predicts good things if governments recede. I am glad you are willing to discuss mechanics and results of this policy.

[CommSense]

gov't leaves energy costs out of the CPI which is typically quoted in the news.

[funnybleh]

@rcdny Oh, OK, "free market" libertarian talking points. You know, if we want to try a really free market, we have to start from scratch. We have to undo almost every existing economic relationship in the entire global economy. Along the way we have to forget a lot of economic and sociological decisions, some good and some bad, made by societies throughout history as they tried to correct shortcomings of the markets. Do you have an idea how long the disruption might last?

[ashokvardineni]

Is this playlist usesful for civil services ?

[interneddsupreme]

My god. You are keeping me Alive from my angry social studies teacher.

[funnybleh]

@rcdny I don't know if you have a good point or not. Do you mean that with regulation prices cannot fall?

[minazkamil]

sir i need to know about promissory notes & bill of exchange could u please upload lecture videos for these topics. thank u .

[rcdny]

@funnybleh no. i mean that with govt regulation, sectors do not operate efficiently and less competiton. with efficiency comes increased productivity, lower prices and a higher standard of living. sorry for the confusion

[funnybleh]

@rcdny No, we don't live in a utopia and never will, until information is instant, known and understood by all everyone. Sounds like science fiction. We need some tmie before we get close to that. Lacking a utopia, we need to predict the outcome of various possible policy approaches so we can decide what to do. I am just trying to get an idea of what level of exclusion from the economy you feel is appropriate for the government and how that might be achieved.

[BarrySlisk]

@WecksyRex
So you are NOT going to share your vast knowledge of inflation?

[WecksyRex]

@BarrySlisk

tax/taks/
Verb: Impose a tax on (someone or something).
Noun: A **compulsory contribution to state revenue**, levied by the government on workers' income and business profits or added to the cost of some goods, services, and transactions.

[rcdny]

lower prices can occur in a growing economy and is a symptom of increased productivity. check out the late 1800s. the reason why technology prices fall is because it's mostly unregulated. central banks don't like deflation because they can conspire with the govt to inflate and create a hiddet tax in the form of inflation.

[icebear]

This one is not a simple-minded subject. You guys should probably get a copy of Ellen Brown's 'Web of Debt' and read it before any further ventures into money theory.

[noxure]

Deflation is the pensioners best friend! ;-)

[BarrySlisk]

@WecksyRex
Why not call him ignorant or just politely state that he has misunderstood something? No need to call him a moron.

But please enlighten us. What don't we understand about inflation?

[mulllhausen]

nope. the cpi in the usa does not include the cost of fuel!

[skerperson]

So is deflation in the technology sector a bad thing? Liberal economists say that deflation is bad, so it must be true. We should set price floors on technology and make it more expensive so we can get some inflation