Deflationary Regulation of Market Equilibrium
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Deflation in economy is defined as a result of reduction of the amount of money in circulation by the Central Bank and the financial sector, which violated the equilibrium. The equilibrium can be restored by the market system in the process of regulating the production of goods through reduction in the number of employed in the production sector in the context of consumer demand. To restore the growth of production of goods and overcome deflationary period, the Central Bank, at the cost of capital employed in production, should establish the amount of money in circulation that ensures the necessary level of inflation. As a result, overcoming the deflation leads to a financial catastrophe with high unemployment and hyperinflation.
Keywordseconomy market demand supply equilibrium labor capital money conjuncture reproduction investment depreciation inflation deflation
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