Compare cost inflation and deflation.

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The major differences between cost inflation and deflation are as follows −

Inflation

  • It increases aggregate price level.

  • If inflation is caused by demand it is called Demand pull inflation.

  • If inflation is caused by supply it is called cost push inflation.

  • It is beneficial to economy.

  • It reduces purchasing power of money.

  • It results in unequal distribution of money.

Deflation

  • It decreases in aggregate price level.

  • If deflation is caused by reduction in money supply, then it is called money supply deflation.

  • If deflation is caused by credit factors, then it is called as credit deflation.

  • It is not good for economy.

  • It increases purchasing power of money.

  • It reduces investments, increase in unemployment.

raja
Published on 25-Jul-2020 07:01:45
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