What economic term describes a reduction in national income and output, usually accompanied by falling prices?

The term that describes a reduction in national income and output, usually accompanied by falling prices, is deflation. Deflation occurs when there is a decrease in the general price level of goods and services in an economy over a period of time. This often leads to lower consumer spending, as people anticipate that prices will continue to fall, which in turn can lead to reduced production, lower income for businesses, and ultimately a decrease in the overall economic output.

Deflation can create a vicious cycle where decreased spending leads to more significant reductions in production and income, which causes prices to fall further. This economic phenomenon contrasts with inflation, where prices increase, but deflation is specifically associated with declining prices and economic activity.

In this context, depreciation and devaluation refer to a decrease in the value of a currency rather than a reduction in national income and prices. Therefore, they do not match the specific description given in the question.