Deflationary gap is common feature is free economy where reliance is put on the automatic adjustment between saving and investment through market mechanism.
Once the deflationary gap is created, speculative activities further widen the gap and as such the condition goes from bad to worse. When the symptoms, that is, falling trend in prices and unemployment, appear in the economy, the entrepreneurs expecting further fall of price, plan their investment as a low level which reduces the employment opportunities and the gap is widened.
In short, the deflationary gap is created because of shrinking of investment to cover up the gap. Bridging the gap by increased investment is made possible by the fixed and monetary measures of the Government and the cooperation of the entrepreneurs. Cooperation of the entrepreneurs depends upon the profit incentives which the state has to create in the economy.