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Difference between deflation and disinflation?
It is decline in goods/services price when rate of inflation falls below zero percentage. It is linked to unemployment and productivity levels of goods/services are low. Deflation acts as economy indicator for deteriorating conditions.
Causes of deflation are as follows −
- Structural changes (capital markets)
- Productivity increased
- When decrease in currency supply
Effects of deflation are −
- Reduces business revenue
- Low wages
It is nothing but decrease in rate of inflation or price inflation is slowing. It is a point where inflation increases at slower rates. Money supply slows down because of tighter monetary policy is cause of disinflation. Disinflation is not always a negative. It can be positive when inflation is high.
The major differences between deflation and disinflation are as follows −
|Deflation occurs in an economy, where there is a fall in general price level.||Disinflation occurs when there is a fall in rate of inflation for a time, but stays positive.|
|Occurs rarely.||Frequently occurs as compared to deflation.|
|Negative sign.||Positive sign.|
|Mainly causes due to shift in demand and supply curve.||Cause due to government deliberate policy.|
|Opposite to inflation.||Opposite to reflation.|
|Occurs prior to employment.||Occurs subsequent to employment.|
|No limit to price fall.||Prices can be brought back to normal.|
|Reduction in interest rates can be used as remedial measures.||No remedial measures are taken by government.|
|Performance of stock market in this condition is bad.||Performance of stock market in these condition may not be that bad.|
|Bond markets perform well in these conditions.||Bond market in these condition may get above average returns.|
|Impact: Economy slow down, unemployment.||Impact: High inflation rate.|
|Poor country economy.||Stable country economy.|
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