How does inflation primarily differ from deflation?
Inflation tracks changing prices but deflation does not.
Inflation relates to rising rather than falling prices.
Inflation happens only when the money supply is too small.
Inflation occurs much less often than deflation does.
Deflation is the opposite of inflation and refers to a decrease in the general price level of goods and services. It typically occurs during economic recessions or depressions when there is a decrease in demand and consumer spending. Deflation can lead to a decrease in production and wages, as well as an increase in unemployment.
Inflation, on the other hand, refers to a general increase in prices and is usually caused by an excess of money supply in relation to available goods and services. Inflation can be caused by factors such as increased demand, supply constraints, or government policies that increase the money supply.
Overall, the primary difference between inflation and deflation is their impact on prices - inflation leads to rising prices, while deflation leads to falling prices.