> Falling prices would lead to less production to match.

Eventually, as firms go out of business. The trend arises from the difference between "break even" and "shut down" prices, and consequent delays in the feedback: it takes some years for producer firms to be removed from the market.

If prices fall for long enough, the idea of falling prices becomes entrenched in households' planning, making everything worse still.

In theory. We’ve had drastically falling prices for computer and communications gear for decades, and it hasn’t stopped people buying.

Desktop and phone sales are slowing down. To be fair, new computers cause old computers to lose their value, buying a new computer works, because you get a better computer. If all you got is the same computer but for a lower price then sales would fall dramatically.

I personally waited 6 years before I upgraded to a Ryzen CPU.

Less production also means less jobs which means greater unemployment.

>Who is going to keep producing if you can’t make a profit?

Those who have to repay their debts.