INFLATION VS DEFLATION
INFLATION V/S DEFLATION
INFLATION
The increase in the prices of commodities is called inflation.
In other words,
The upward price movement of goods and services from an economic year is called inflation.
An increase in the quantity of money and credit is called inflation.
DEFLATION:
The decrease in prices of commodities is called deflation.
In other words,
A decline in general prices level is called deflation.
Falling prices of commodities is called deflation.
CAUSES OF INFLATION:
There are many causes of inflation which are as under,
- The first cause of inflation is that when the government prints the excessive amount of money to deal with a financial crisis.
- The second cause of inflation is the international lending and national debts.
- The third cause of inflation is the rise in production cost which impact on the final goods of the company product price raising.
- The fourth cause of inflation is the income taxes and sales taxes.
CAUSES OF DEFLATION:
There are some causes of deflation which are as under,
- Decrease in the money supply.
- Increase in the supply of goods.
- Demand of the goods falling.
- Ups and downs in the demand for money.
- Decline in the money supply in the market.
- Higher interest rates.
- Less return of profit.
- Negative impact on the economy.
INFLATION VS DEFLATION:
Inflation and deflation conditions are not good for the economy. Inflation and deflation are both not good and bad for the economy. It depends on the country economy condition. The higher interest rates are also effect the country economy. A decrease in the prices of commodities increases the demand of goods. This kind of strategy leads to deflation condition. Due to decrease in the prices company also fall their profit margins. Dew to this situation a company suffers loss and declining in the profit margins a company closes its business. It has lots of negative effects on the country economy.
Tags: causes of deflation, Causes of Inflation, Demand of Money, Inflation V/s Deflation, Rising of Commodities