Whats the difference between inflation and deflation?

Whats the difference between inflation and deflation?

Sure, here's the difference between inflation and deflation:

Inflation

  • A sustained increase in the general price level of goods and services in an economy.
  • It can be caused by various factors, including increased demand, low supply, or a combination of both.
  • When inflation is high, it can erode the value of savings and investments, making it more difficult for people to buy things with money they have saved.
  • It can also lead to higher interest rates, as central banks may raise interest rates to slow down economic growth and control inflation.

Deflation

  • A sustained decrease in the general price level of goods and services in an economy.
  • It can be caused by various factors, including decreased demand, high supply, or a combination of both.
  • When deflation is high, it can lead to lower prices for goods and services, making it easier for people to buy things with money they have saved.
  • It can also lead to lower interest rates, as central banks may lower interest rates to stimulate economic growth and attract investment.
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