What is the difference between inflation and deflation?

Inflation vs. Deflation: What's the Difference? Inflation occurs when the prices of goods and services rise too much, too quickly, while deflation occurs when those prices decrease. The balance between these two economic conditions, opposite sides of the same coin, is delicate, and an economy can quickly swing from one condition to the other.

What happens during deflation?

During deflation, the purchasing power of currency rises over time. Deflation is the general decline in the price level of goods and services. It is usually associated with a contraction in the supply of money and credit, but prices can also fall due to increased productivity and technological improvements.

What is deflation in economics?

Deflation is a sustained decrease in the price level of goods and services. Inflation, disinflation and deflation refer to increasing or decreasing average price levels of the economy. They usually are calculated as the percentage change in a given price level over a certain period of time—for example, the percentage change from a year earlier.