Inflation & Deflation

What is Inflation?

Inflation is defined as an increase in the price of bunch of Goods and services that projects the Indian economy. An increase in inflation figures occurs when there is an increase in the average level of prices in Goods and services. Inflation happens when there are less Goods and more buyers, this will result in increase in the price of Goods, since there is more demand and less supply of the goods.

 

What is Deflation?

 Deflation is the continuous decrease in prices of goods and services. Deflation occurs when the inflation rate becomes negative (below zero) and stays there for a longer period.

During deflation the price of goods and services is falling and consumers will tend to delay their purchases until prices fall further. This will cause for a lower production, lower wages and demand which will lead to further decrease in prices.