Low inflation might be the first step towards deflation. Many economists would argue that deflation is a worse situation for the economy because it leads to a sharp drop of consumption and therefore a huge recession follows?
Governments absolutely have tools:
namely, monetary and fiscal stimulus. A perfect example is Australia during the 2008 GFC. The government issued direct cash payments to citizens to stimulate consumer spending over the holidays. It kept money moving through the economy and successfully shielded the country from a global recession.
Singapore, Taiwan, Japan and even the US have taken similar measures in the last 30 years
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u/StuartMcNight 8h ago
Low inflation might be the first step towards deflation. Many economists would argue that deflation is a worse situation for the economy because it leads to a sharp drop of consumption and therefore a huge recession follows?