Disadvantages of Inflation and Deflation 25

Inflation is relatively straightforward and simple, that is, the price of goods is too high and the currency is depreciated.

Deflation--- when the currency circulating in the market decreases, the people's monetary income decreases, and the purchasing power decreases, which affects the price of goods and causes deflation. Prolonged monetary tightening will dampen investment and production, leading to higher unemployment and a recession.

You can think of it this way.

For example, if there is only one table in the society and another 100 yuan, then we can generally say that the table is worth 100 yuan; And there are two tables, there are still 100 yuan, and one table becomes 50 yuan, so it can be seen that the money itself is a price tag.

So inflation is not difficult to understand: the currency depreciates, the price level persists**.

Adverse effects: Prices are expected to increase social consumption and reduce social savings, thereby reducing social investment and restricting the development of production. Inflation transfers a part of the income held by residents and enterprises to the first sector that issues money through the "forced savings effect", thereby changing the original income and wealth distribution ratio, which may lead to "the poor getting poorer and the rich getting richer".

Deflation: too little money is issued, prices are constantly rising, companies are laying off employees, etc.

Adverse effects: Commodities are constantly changing, but the costs of workers' wages and other costs are difficult to change for a while, resulting in a decrease in corporate profits or even losses, which will reduce social investment and compress production, which in turn will lead to deflation in the cause and a wider range. For example, from 1929 to 1933, the world's worst deflationary crisis broke out in history, known as the "Great Depression".

Which is better, price ** or a decline? Analyzing the effects of "inflation" and "deflation"!

The simplest meaning of inflation is that money is worthless, and the phenomenon of price **.

Deflation is an economic phenomenon opposite to inflation, which is manifested as insufficient social demand, weak or low prices, producers and operators dare not invest, consumers dare not spend money, banks and financial institutions dare not lend, and the entire economy is in a state of long-term depression.

Inflation: The aggregate supply of society is less than the aggregate demand.

Deflation: The aggregate supply of society is greater than the aggregate demand.

Inflation makes money worthless, and prices are not conducive to the healthy development of the national economy.

Appropriate, short-term deflation can expand the reproduction of enterprises and the purchasing power of people's money, and people's money will be worth more. However, from the perspective of long-term interests, it is not conducive to the healthy development of the national economy.

What are the risks and investment opportunities that inflation and deflation bring to individuals?

Which is better, price ** or a decline? Analyzing the effects of "inflation" and "deflation"!

Prices are closely related to the lives of ordinary people, and the level of prices is usually linked to inflation or deflation. However, many people do not distinguish between the two concepts very well, and often wonder whether the current economy is expanding or contracting. So what is the difference between inflation and deflation?

The difference between inflation and deflation

1. The reasons for the occurrence are different

Inflation refers to the fact that the amount of issuance exceeds the quantity required in circulation, and the essence is that the total demand of the society is greater than the total supply of the society, that is, too much money chases too few goods, resulting in the price level persistent.

For example, after the defeat of Germany, in order to pay war reparations, a large amount of currency was issued, which eventually led to the outbreak of domestic inflation.

Deflation, on the other hand, is that aggregate demand is less than aggregate supply. For example, Japan's economic depression and deflation lasted for many years after the bursting of the bubble economy in the last century.

2. The specific performance is different

The direct manifestation of inflation is the general price level**, the depreciation of the currency, and the decline in the purchasing power of money. For example, in the past, 30 yuan could buy 3 catties of pork, but after inflation, 30 yuan could only buy 1 catty of pork.

The main manifestations of deflation are the decline in the price level, the sluggish economic situation, and the decrease in investment and consumption behavior, which in turn leads to a decrease in the wage income of the people and an increase in the number of unemployed.

3. The hazards are different

One of the main harms of inflation is the widening gap between rich and poor in society. After the currency is overissued, it needs to go through a period of circulation before it can enter the pockets of ordinary people, at which time the price has been **, and the purchasing power has declined. Those who were the first to receive the over-issued currency were able to quickly accumulate wealth before the price of goods was up.

The main danger of monetary tightening is recession and triggering financial crises. Deflation means that people have less income, more debt, and less ability to repay bank debts, which can lead to bank bankruptcy and even the collapse of the financial system.

Both inflation and deflation have a negative impact on the economy and people's lives, but the prevailing view is that deflation is far more destructive than inflation.

Inflation is defined as the depreciation of a currency. The reason for inflation is the imbalance between the supply and demand of total commodities in society, that is, the supply of commodities exceeds demand, and the reason for the shortage of supply is that the speed of development is too high, and the reason for the high rate of development is that the stage of development is too low.

Inflation is an economic phenomenon. This phenomenon contains three variables: first, monetary expansion; second, the supply of commodities exceeds demand; The third is currency depreciation.

The relationship between the three is that monetary expansion is the result of currency depreciation, not the cause of currency depreciation. Since commodities are in short supply and currencies are depreciating, in order to balance changes in wages and price indices and expand investment production,** and businesses expand credit, leading to monetary expansion.

Inflation is simply a strong reaction of aggregate supply to a decrease in the proportion of aggregate demand. Inflation shows that the growth rate of the "holding rate" of society exceeds the growth rate of the "currency holding rate".

Deflation, in its conceptual sense, exists in economics in response to inflation. To put it simply, the amount of money issued by a country is less than the amount of money needed in real circulation and economic transactions, which is manifested as a lack of overall demand.

Deflation will cause both employment and prices to fall, and once it exceeds the warning line of the "tolerable range", it will inevitably give a "red light" to economic development.

Deflation is very harmful.

Under deflation, all commodities and producers' desire to produce goods is reduced. In this case, the impetus for economic development will be gone. Economic policymakers in general are reluctant to see the tide of deflation.