What is inflation:
Inflation is when prices of goods and services go up over time. Example: A bottle of milk that cost ₹40 last year now costs ₹45.
What is defation:
Deflation is when prices of goods and services go down over time. Example: A TV that cost ₹30,000 last year now costs ₹27,000.
Advantages of inflation:
Encourages people to spend or invest rather than hoard money.
Can help businesses grow as they earn more.
Makes it easier for borrowers to repay loans, as money loses value.
Disadvantages of Inflation:
Reduces the value of money and this makes goods more expensive.
Hurts people with fixed incomes (like pensioners).
Can lead to uncertainty in the economy.
Advantages of deflation:
Things become cheaper, so consumers can buy more.
Helps people with savings as their money becomes more valuable.
Boosts purchasing power, inwhich people can buy more with the same amount of money.
Disadvantages of Deflation:
People may delay spending, hoping prices fall more.
Businesses earn less profit and may cut jobs.
Can lead to economic slowdown or recession.
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