How dose inflation primarily differ from deflation? (1 point)
Inflation and deflation primarily differ in terms of the direction of change in the general price level.
Inflation refers to a sustained increase in the general price level of goods and services over a specific period of time. This means that the purchasing power of money decreases, i.e., more money is required to buy the same amount of goods or services. Inflation is often caused by factors such as excessive money supply, increased production costs, or increased demand.
On the other hand, deflation refers to a sustained decrease in the general price level of goods and services over time. This means that the purchasing power of money increases, i.e., less money is required to buy the same amount of goods or services. Deflation can result from factors such as reduced demand, decreased money supply, or technological advancements leading to increased productivity and lower production costs.
In summary, while inflation involves a sustained increase in prices leading to a decrease in the purchasing power of money, deflation involves a sustained decrease in prices leading to an increase in the purchasing power of money.