Meaning
Rate at which level of prices of goods & services rise and subsequently purchasing power fails
3 Types
Types of Inflation
Other Terms
Deflation
- decline in prices
- due to reduction in supply of money
- opposite of inflation
- bad because
- ppl postpone purchasing decisions
- just sitting on cash becomes investment with +ve yield
- slows down economy
- low demand low employment
Disinflation
- slowing down rate of inflation
- inflation is STILL there, but rate is down
Recession (or slowdown)
- demand starts decreasing first
- thus production decreased
- there should not be high inflation as demand reduces first
Philips Curve
- inflation & unemployment have stable & inverse relationship
