Difference Between Inflation And Inflation
INFLATION
1. Inflation is when there is a substantial rise of level of goods and services, due to an increase in the volume of money in an economy over a period of time. It is referred as the increasement of money supply.
2. The different types of inflation are:
Demand pull inflation – This occurs when AD (Aggregate Demand) increases at a faster rate than AS (Aggregate Supply). It exists when the economy is growing faster than the long run trend rate of growth. When demand exceeds supply, firms respond by pushing up prices.
Cost push inflation – This occurs when firms raise prices in order to maintain or protect margins after experiencing a rise in the cost of production.
Wage inflation – This is a combination of demand pull and
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Deflation- A general decline in prices, often caused by reduction in the supply of money or credit. Also, it can be because of a decrease in investment, government and personal spending. This is the opposite of Inflation. (A fall in the general price level).
Disinflation – The process of reversing inflation without creating unemployment or reducing the output in the economy. It is a deliberate attempt to counter a highly inflationary situation. (A decrease in the rate of inflation).
Nevertheless, the differences between reflation and stagflation are because reflation is a rise in the rate of inflation while the prices were not rising and stagflation is more serious, when the economy becomes stagnant, but still experiences inflation. In addition, the differences between deflation and disinflation are that deflation can be both manmade and natural. Disinflation is always planned and is based on the government policy. Deflation always emerges in the form of depression and disinflation price level comes to normal
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