<p>For some models, deflation makes consumers save more, because they expect one unit of money in the future to buy more goods than one unit now. Consumption falls, so revenue and current profits fall. </p>

<p>The fall in demand and profit may have feedback effects: less investment, less innovation. </p>

<p>In general, depends on the model you are using. In a static model with homogeneous firms, the real profits may stay unchanged. </p>

CC BY-SA 4.0
2018-10-06T09:08:56.440Z
Why is there less investment if people are saving more?
Giskard
CC BY-SA 4.0
2018-10-06T09:11:03.880Z
Firms in that particular country invest less, because they have less money to invest with. Savings flow to other countries.
Sander Heinsalu
CC BY-SA 4.0
2018-10-06T08:56:34.260Z
2018-10-06T08:56:34.260Z
Sander Heinsalu
<p>Profits are the difference between input and output prices. So profits would only fall in those industries where output price fell faster than input price.</p>

<p>Is there any reason deflation would reduce profits in all industries rather than just some?</p>

CC BY-SA 4.0
2018-10-06T05:43:19.473Z
Can you describe the underlying problem that you're trying to solve? It sounds like you're trying to verify a claim, but without the context of that claim, this isn't very meaningful. And your definition of profits seems to miss the general and admin costs.
410 gone
CC BY-SA 4.0
2018-10-06T08:54:05.390Z
Nominal or real profits?
Sander Heinsalu
<finance>
Is there any reason deflation would reduce profits?
user19657
# Is there any reason deflation would reduce profits?

(Asked by: username_0 on 2018-10-06)

Profits are the difference between input and output prices. So profits would only fall in those industries where output price fell faster than input price.

Is there any reason deflation would reduce profits in all industries rather than just some?

**Tags:** finance

> **Comments:**
> **username_1**: Can you describe the underlying problem that you're trying to solve? It sounds like you're trying to verify a claim, but without the context of that claim, this isn't very meaningful. And your definition of profits seems to miss the general and admin costs.  
> **username_2**: Nominal or real profits?  

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## 1 answers

### Answer by username_2 on 2018-10-06. Score: 1

For some models, deflation makes consumers save more, because they expect one unit of money in the future to buy more goods than one unit now. Consumption falls, so revenue and current profits fall.

The fall in demand and profit may have feedback effects: less investment, less innovation.

In general, depends on the model you are using. In a static model with homogeneous firms, the real profits may stay unchanged.

> **Comments:**
> **username_3**: Why is there less investment if people are saving more?  
> **username_2**: Firms in that particular country invest less, because they have less money to invest with. Savings flow to other countries.  

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