Decline in the common price level of goods and services is called as deflation. This situation arises when the inflation (raise in prices and decrease in the buying value of money) falls below 0%. This is a phenomenon when the periodic change in consumer price index (CPI) is negative. Although deflation adds to the actual value of money, but it is not appreciated in today’s modern economics. It actually boosts the real value of debt, aggravating recession period and increasing unemployment rate as a result of closing of businesses.
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Disinflation is always good for the economy of a country as it is a “drop off (decrease) in the rate of inflation.” It is basically takes place when a boost in the consumer price level decreases as compared to the previous period of time, when prices were increasing. However, it occurs for a short time period, when an economy will be suffering from recession downturn.
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