ECONOMICS (CBSE/UGC NET)

Detailed explanation-1: -In other words, when the money supply increases, and neither velocity nor quantity changes, the price level must also increase-we call this inflation. This equation helps us understand the relationship between money supply and price level.

Detailed explanation-2: -Inflation occurs when prices rise in an economy and/or the purchasing power of money loses value. Economists have identified several possible causes for inflation from rising wages to increased aggregate demand to an increase in the supply of money.

Detailed explanation-3: -Deflation is the economic term used to describe the drop in prices for goods and services. Deflation slows down economic growth. It normally takes place during times of economic uncertainty when the demand for goods and services is lower, along with higher levels of unemployment.

Detailed explanation-4: -Inflation happens when the price of goods and services increase, while deflation takes place when the price of the goods and services decrease in the country. Inflation and deflation are the opposite sides of the same coin.