About 3 million Canadians lost their jobs and more than 3 million people found themselves working less than half of their normal hours. Businesses closed shop in record numbers. Inflation fell sharply, even dropping into negative numbers. We were staring down another Great Depression and the possibility of deflation. Deflation happens when prices across the economy actually fall.
While this might not sound bad, the truth is that persistent deflation is dangerous. When unemployment rises rapidly and overall prices begin to fall, households may reduce spending if they think that goods and services will become even cheaper in the future. But putting off spending results in less demand, leading to more job losses and more business closures.