Savings and Investment Perspective: Systematic deflation would increase the value of money over time. This leads to an increased incentive for individuals to save, as the purchasing power of their money grows. While some economists argue that this can lead to decreased consumer spending and thus dampen demand, proponents of systematic deflation counter that these savings would likely be invested in banks or financial instruments. Banks could then lend out these funds, supporting investment in businesses and capital goods, possibly offsetting the decline in consumer demand.

Supply-side Perspective: Systematic deflation may not necessarily impact the supply side negatively. If deflation is the result of increased productivity and technological advancements (supply-side deflation), it can lead to lower production costs. These cost reductions can then be passed on to consumers in the form of lower prices, increasing real incomes and potentially maintaining or even boosting demand.

It's essential to distinguish between "good deflation" caused by supply-side factors like increased productivity and "bad deflation" stemming from a fall in demand. Good deflation might be seen as beneficial or at least not harmful, whereas bad deflation, if persistent, could lead to a deflationary spiral where reduced demand leads to further price reductions, resulting in decreased business profits, lower wages, and a subsequent further decline in demand.

Critics of deflation often point to the risks of a deflationary spiral, especially in the context of bad deflation. The Japanese experience in the 1990s is often cited as an example of how persistent deflation can lead to economic stagnation. Critics also argue that deflation might make it more difficult for governments to service debt, as the real value of debt would increase.