What is the effect of deflation on the Consumer Price Index (CPI)?

Deflation is when prices of goods and services decrease over time, which can significantly affect the Consumer Price Index (CPI). The CPI measures the average change in prices that consumers pay for a basket of goods and services, so when deflation occurs, the CPI will show a decline. This means that consumers can buy more with the same amount of money, but it can also indicate economic problems, like reduced consumer spending and lower demand. For example, if the cost of groceries drops because of deflation, the CPI will reflect this decrease, showing that prices are falling. Overall, while deflation might seem good for consumers at first, it can lead to negative effects on the economy.