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Compare cost inflation and deflation.
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.
Updated on: 25-Jul-2020
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