Debt-deflation

Debt-deflation is a theory according to which an unexpected fall in the price level redistributes real wealth from debtors to creditors and, therefore, reduces total spending in the economy.

Definition

According to Macroeconomics by Mankiw (7th edition),

Debt-deflation. A theory according to which an unexpected fall in the price level redistributes real wealth from debtors to creditors and, therefore, reduces total spending in the economy.