Types of Inflation
Disinflation
Disinflation is a slowing in the rate of price inflation. It is used to describe instances when
the inflation rate has reduced marginally over the short term. Although it is used to describe periods
of slowing inflation, disinflation should not be confused with deflation.
Disinflation is a slowing in the rate of price inflation. It is used to describe instances when
the inflation rate has reduced marginally over the short term. Although it is used to describe periods
of slowing inflation, disinflation should not be confused with deflation.
Deflation
Deflation is the opposite of inflation and occurs when prices are declining over time and the inflation
rate becomes negative.
Deflation is the opposite of inflation and occurs when prices are declining over time and the inflation
rate becomes negative.
Questions - Use Your Note Taker To Jot Down Ideas / Calculations
‘In January 2014, the UK inflation rate was 1.7%. In February 2014, the UK inflation rate was 1.4%. What term is used to describe this change?’
a) Disinflation.
b) Stagflation.
c) Deflation.
d) Inflation.
A)
‘Disinflation basically means
a reduction in the rate of inflation. This is not the same as deflation as deflation indicates a negative
rate of inflation. In the above example the rate of inflation falls from 1.7% to 1.4% showing that
inflation is still positive but slowing – this is disinflation’
- Further Study Text: Pages 120-121