Inflation vs deflation essay

Deflation vs Inflation Source: They even hinted at the possibility of deflation.

Inflation vs deflation essay

What is the Difference Between Inflation and Deflation? By Troy Segal Updated March 16, — 4: The balance between the two economic conditionsopposites of the same coin, is delicate, and an economy can quickly swing from one condition to the other. Inflation is caused when goods and services are in high demand, creating a drop in availability.

Supplies can decrease for many reasons: A natural disaster can wipe out a food crop; a housing boom can exhaust building supplies, etc. Whatever the reason, consumers are willing to pay more for the items they want, causing manufacturers and service providers to charge more. Deflation occurs when too many goods are available or when there is not enough money circulating to purchase those goods.

For instance, if a particular type of car becomes highly popular, other manufacturers start to make a similar vehicle to compete. Soon, car companies have more of that vehicle style than they can sell, so they must drop the price to sell the cars.

Companies that find themselves stuck with too much inventory must cut costs, which often leads to layoffs. Unemployed individuals do not have enough money available to purchase items; to coax them into buying, prices get lowered, which continues the trend.

When credit providers detect a decrease in prices, they often reduce the amount of credit they offer. This creates a credit crunch where consumers cannot access loans to purchase big-ticket items, leaving companies with overstocked inventory and causing further deflation.

Deflation can lead to an economic recession or depressionand the central banks usually work to stop deflation as soon as it starts.Sep 03,  · Inflation Essay Inflation and Economy - Words. Essay on Inflation Identify and define inflation, disinflation and deflation? Inflation-Inflation can be defined as a general increase in the price level of a nation over a period of time.

An increase in the price of a particular good or service does not mean that inflation has. The difference between inflation and deflation is presented here in tabular form and points. The two terms are completely opposite to each other. The first and foremost difference is When the value of money decreases in the world market, it is inflation, while if the value of money rises then it is deflation.

Inflation occurs when the price of goods and services rise, while deflation occurs when those prices decrease.

The balance between the two economic conditions, opposites of the same coin, is. Inflation is when prices rise, and deflation is when prices fall. In the short run, inflation is worse.

In the long run, deflation is more damaging. Inflation vs deflation essays.

Inflation vs deflation essay

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I know the UK has inflation of %, but deflation is a potential problem around the world. In April of this year: US core consumer prices rose by a mere % - lowest rate for many years.

Economics Essays: Deflation vs Inflation