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Which is Worse; Inflation or Deflation?
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| Submitted: Fri Jan 28 2005
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Which is Worse; Inflation or Deflation? In discussion of healthy economies, one of the main considerations is the rate of inflation, or perhaps deflation. Inflation is most common and is defined by an increase in average prices throughout the economy. Consequently the value of money decreases because people can buy less now with the same amount as money as before. In absolute contrast to this, deflation means that there is a fall in prices and so the value of money is raised simultaneously. Another term falling into the issue of inflation or deflation is disinflation. This is simply a fall in the rate of inflation. Typically, as regards to macroeconomic policy, the government aim for a low and stable inflation rate. Benefits can be enjoyed from the low and stable rate of inflation that governments target. Low inflation can urge economic growth. For example, firms are encouraged to invest and expand...
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