>computers gets cheaper per unit each year but if you want a computer now you still buy one (as many people do). In fact, you may just end up buying one now AND

>computers gets cheaper per unit each year but if you want a computer now you still buy one (as many people do). In fact, you may just end up buying one now AND in a year as they keep getting cheaper. That's supply side deflation of a specific industry, which isn't harmful. It's a isolated thing. (And a good thing) The "other type" is when the entire economy does it because there isn't enough money. That's a horrible thing and what happened in the Great Depression. (This is often called "Bad deflation" while the industry getting better at making things version is called "good deflation") > taking a vacation right now might be worth an extra $50 bucks In the specific case, yes, but in the general case, everyone spends less money in deflation than in inflation, as it is an investment. This includes businesses, which eventually turns into laid off staff. >3. If people stop investing their money they might save it instead. Why assume that saving money is bad? Savings (as opposed to investment) past a certain point is bad. It causes more deflation, as it pulls money out of circulation, which further causes a drop in prices. The Great Depression was a time of lots of savings for those who had cash. All this currency coming out of the economy caused more deflation, etc. Remember, as a thing becomes more rare, it's value goes up. As more money is saved, it's value goes up for everyone (aka more deflation occurs).