What Is Deflation And Inflation Or Deflation: Which One Is Less Harmful

What is Deflation

Deflation is a decrease in the general price level of goods and services. Deflation occurs when the annual inflation rate falls below 0% (a negative inflation rate). Inflation reduces the real value of money over time conversely, deflation increases the real value of money the currency of a national or regional economy. This allows one to buy more goods with the same amount of money over time.
A general decline in prices, often caused by a reduction in the supply of money or credit. Deflation can be caused also by a decrease in government, personal or investment spending. The opposite of inflation, deflation has the side effect of increased unemployment since there is a lower level of demand in the economy, which can lead to an economic depression. Central banks attempt to stop severe deflation, along with severe inflation, in an attempt to keep the excessive drop in prices to a minimum.
Incase of deflation, the demand of any product will be decrease compare with its supply. When the demand of any product is lower than its supply, peoples are not wants to buy any product, the huge quantity of product became unsold to the seller. So price of unsold product will be decline rather than its cost. That why deflation is harmful for any economy.

What is deflation

Inflation or deflation: which one is less harmful

Compare in inflation and deflation
All the country wants a inflation free economy, inflation is harmful for any economy. But an acceptable level of inflation is beneficial for economy, because it helps to increase the national income and production. But deflation is more harmful for any economy than inflation. Because it leads to breakdown the economic stability of any country. Produces face great loss incase of deflation. It is a great depression of any economy. So we can clearly say that inflation is less harmful.


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