A-Z Popular Blog Top Search »
Economics
Simplicable Guide
A-Z
Search
Popular
Sitemap
Advertisements
Related Comparisons
Economics
top   »  economics   »  economic problems   »  inflation   »  inflation vs deflation

Inflation vs Deflation

 , June 01, 2016
Inflation is a sustained increase in the price of goods and services. Deflation is a sustained decrease in prices.
A small amount of inflation is generally considered good for an economy as it encourages consumers to spend and people to invest productively.
Deflation, even a small amount of deflation, is typically viewed negatively. When prices are always dropping, consumers have incentive to delay purchases resulting in less economic activity. This can cause businesses to close and the unemployment rate to go up. A high unemployment rate means that employees can't demand a high salary because jobs are scarce. This tends to reduce prices further in a downward spiral.
Another negative impact of deflation is that it discourages investors from taking risk. When cash is increasing in value you can make money by doing nothing with your savings. This discourages people from starting businesses and employing people.
Economists tend to recommend a low inflation rate as a target because it keeps people spending and people investing their money into productive ventures. A high inflation rate can be just as damaging as deflation, in some cases it is far worse.
Inflation vs Deflation
InflationDeflation
DefinitionA sustained increase in the price of goods and services.A sustained decrease in the price of goods and services.
ImpactA low inflation rate may be conductive to economic growth.
A high inflation rate and hyperinflation have negative impacts.
Generally viewed negatively as it discourages productive investment and spending.

Economics

This is the complete list of articles we have written about economics.
Added Value
Advanced Economy
Adverse Selection
Animal Spirits
Arbitrage
Attention Economics
Bargaining Power
Barriers To Entry
Behavioral Economics
Behavioral Finance
Bounded Growth
Bounded Rationality
Business Cluster
Business Value
Capital Flight
Capital Goods
Capitalism
Capitulation
Circular Economy
Club Theory
Commodification
Commodities
Comparative Advantage
Competition
Competitive Parity
Competitiveness
Consumerism
Cost Competition
Critical Mass
Customary Pricing
Deadweight Loss
Debt
Deflation
Demand
Division Of Labor
Dumping
Economic Activity
Economic Advantage
Economic Bad
Economic Context
Economic Development
Economic Growth
Economic Infrastructure
Economic Problems
Economic Sector
Economic Systems
Economic Theories
Economics
Economies Of Density
Economies Of Scale
Experience Economy
Extreme Value Theory
Factors Of Production
Failure Demand
Finance
Fiscal Dominance
Free Market
Gains From Trade
Gdp
Giffen Good
Goods
Hyperinflation
Income Distribution
Industrial Complex
Industrial Economy
Industrialization
Inferior Good
Inflation
Information Asymmetry
Intangible Goods
Intangible Value
Investing
Knowledge Economy
Labor
Labor Productivity
Long Tail
Macroeconomics
Marginal Utility
Market Conditions
Market Economy
Market Failure
Market Forces
Market Power
Marketing Economics
Markets
Mean Regression
Media Economics
Merit Good
Microeconomics
Middle Class
Monetary Policy
Monopoly
Overexploitation
Plateau Effect
Predatory Pricing
Price Economics
Price Umbrella
Price War
Pricing Strategy
Production
Profit Motive
Rational Choice Theory
Rent Seeking
Resources
Rule Of Three
Scalability
Scale
Search Good
Service Economy
Shrinkflation
State Capitalism
Sticky Prices
Superior Goods
Supply
Supply Shock
Sustainable Economics
Switching Barriers
Threat Of Substitutes
Trade War
Traditional Economy
Unsought Goods
Value Creation
Veblen Goods
Zero-sum Game
If you enjoyed this page, please consider bookmarking Simplicable.
 
Cite »

Inflation vs Stagflation

The difference between inflation and stagflation.

Quality vs Value

The subtle difference between quality and value.

World Income Distribution

A simple metric of income distribution with data.

Business Risks

A list of common business risks.

Risk Treatment

The four things that can be done about risk.

Risk Management Effectiveness

A metric for measuring risk management.

Positive Risk

The potential that you'll achieve too much of a good thing.

Dread Risk

Any risk that people have a strong aversion too.

Risk Taking

The definition of risk taking with examples.

Risk Examples

A list of risk examples by type.

Risk Probability vs Risk Impact

The two main factors in modeling a risk.

Calculated Risk

A definition of calculated risk with an example.

Relative Risk

How to calculate relative risk with examples.

Trending

The most popular articles on Simplicable in the past day.

New Articles

Recent posts or updates on Simplicable.
Site Map
Capital
Competition
Consumer Behavior
Economic Problems
Economic Systems
Economics
Entrepreneurship
Finance
Financial Analysis
Goods
Government
Industries
Infrastructure
Innovation
Investment
Marketing
Marketing Economics
Markets
Microeconomics
Pricing
Productivity
Quality Of Life
Risk
More ...
© 2010-2023 Simplicable. All Rights Reserved. Reproduction of materials found on this site, in any form, without explicit permission is prohibited.

View credits & copyrights or citation information for this page.

About     Privacy Policy     Cookies Terms of Use     Contact Us


Cookies help us deliver our services. You have choices regarding these cookies. Please visit our privacy policy, cookie policy and consent tool to learn more.


Copyright 2002-2023 Simplicable. All rights reserved. This material may not be published, broadcast, rewritten, redistributed or translated. Report violations here.