ECONOMICS (CBSE/UGC NET)

Detailed explanation-1: -You can have both inflation and deflation at the same time in various asset classes. When taken to their extremes, both are bad for economic growth, but for different reasons. That’s why the Federal Reserve, the nation’s central bank, tries to control them.

Detailed explanation-2: -In economics, deflation is a decrease in the general price level of goods and services. Deflation occurs when the inflation rate falls below 0% (a negative inflation rate). Inflation reduces the value of currency over time, but sudden deflation increases it.

Detailed explanation-3: -When the prices measured in aggregate by the CPI are lower in one period than they were in the period before, the economy is experiencing deflation. Conversely, when the prices collectively rise, the economy is experiencing inflation.

Detailed explanation-4: -Deflation, or negative inflation, happens when prices generally fall in an economy. This can be because the supply of goods is higher than the demand for those goods, but can also have to do with the buying power of money becoming greater.