Lower prices increase competitiveness, demand and supply, both...

Normally, the economists view higher prices and inflation and expectations to cut real interest rate, real wages and real exchange rate and expectations to make the economy competitive domestically and externally or globally in order to incentivize demand and supply, and, investment and employment, and expectations to achieve the equilibrium, or NAIRU – the non accelerating inflation rate of unemployment, of full employment growth rate and expectations. But, they fail to recognize that inflation reduces real spending and savings and investment and employment and expectations while increasing the nominal interest rate, nominal wages and the nominal exchange rate which makes the economy lose competitiveness and demand and supply, however exports may increase through higher exchange rate. They think that higher prices would incentivize the supply side to increase employment and demand, but when prices increase, they negatively affect demand and spending first and then lower savings and investment and employment and expectations which would lower growth and expectations. Generally, people expect that price of everything increase in the long run so they need higher incomes and savings to achieve the desired standard of living. Nonetheless, if people expect higher prices in the future they might rush to buy which could further increase demand and prices, inverse of the expectation that lower prices would delay spending and it would again lower the prices. This has been observed by the Knife Edge Problem due to expectations; lower growth and price expectations are cumulative in effect and also produce trade cycles and vice versa. The higher prices to increase investment and supply first reduce demand which might set the precedent for lower prices because supply would outpace demand due to lower real wages despite employment, higher prices cut real wages and demand as experienced by the developed countries, inflation and lower real wages have reduced demand relative to supply, even though investment and employment has increased which has lowered price and growth expectations.

Notwithstanding, if we assume lower prices it would increase real interest rate, real wages and the exchange rate which would increase demand and spending and savings and investment and supply and expectations.

Economists think that lower real wages, real interest rate and exchange rate incentivize supply, but they reduce domestic demand and imports, but increases exports which also depend on the external demand and global growth and are sometimes uncertain. Nevertheless,  higher real wages, real interest rate and real exchange rate increase domestic demand, imports and exports due to higher spending and savings and investment to achieve full employment, lower prices would also help contain cost and increase competitiveness and supply.