That’s deflation. Deflation occurs when prices across the economy consistently fall. While it might seem good for consumers, it's dangerous long-term. Falling prices can lead to reduced profits for businesses, layoffs, and less spending overall. People may delay purchases, expecting prices to drop further, which slows down economic activity.

In severe cases, it can trigger a recession or even a depression. Deflation often happens during financial crises when demand collapses or debt levels are too high. Central banks combat it by lowering interest rates and increasing the money supply.