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The concepts of inflation and deflation

Very few times have all surely hate talking about inflation and deflation, two basic concepts for the economy , however rarely and very few people are those who can safely give its exact definition and explain these two concepts.

Inflation and Deflation: Two basic concepts of economics

The lack of interest in the knowledge of these two terms can affect your economy if you are considering makinginvestments , start a business or make money in general, so we recommend you to continue reading this article to know about the inflation and deflation.

Inflation and deflation

The concept of inflation can be basically like increase in the general level of prices, this inflation can cause a loss on the purchasing power of money, it can be a problem for many people.

Why it can be a problem? Simply because inflation makes people increasingly can buy fewer goods and productsas such because the prices they grow faster than basic wages.

On the other side, when a low price is presented  we can say that there is a deflation , usually distinguish between occasional price increases sustained increase thereof.

It turns out that the first characteristic is taken by many economists as a weak definition of inflation by not requiring that the price increase becomes permanently and many do not even consider this option as inflation itself.

The second concept is known or referred to as a strong definition of inflation requires that if an increase in share price over time, here is where we talk about the concept of inflation.

Then we can clearly say that deflation is in general fall of prices of services, products and goods within an economy as such, then it is in any case the opposite of inflation.

This is an economic situation where prices of products services down due to lack of demand and response is much more dangerous than inflation situation.

When deflation occurs similar to a situation may occur ,traders are forced to sell the products to cover their fixed costs and represent that sell at the lowest prices.

Both inflation and deflation are two basic concepts of economics to be of knowledge to all those people who buy, sell or invest in general are related to the economy of any kind.

These two concepts should be taken into account in any negotiations as l basically are you defining prices, income fluctuations that may leave certain market or the economy as such.

We hope that now has clear these two concepts and can do better in the world economy.

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