Hello everyone welcome to the series of economics in four minutes this is akhman shah from crack economics and statistics in this video we are going to discuss the idea of inflation deflation disinflation and reflection candy subscribe to our youtube channel to find more videos on economics spss and rstudio.
Let's begin with the idea of inflation inflation is the rate of increase in general price level over a given period of time for example inflation rate is 5 percent which means that the general price level increases at five percent over a given period of time so during inflation the purchasing power.
Of money or value of money falls let's understand the idea of deflation and how it differs from the idea of inflation deflation is the rate of decrease in general price level over a given period of time so inflation is the rate of increase while deflation is the rate of.
Decrease so here inflation rate is negative we have minus five percent so general price level decreases at five percent so in this case the purchasing power of money or value of money increases so with the same amount now consumers can buy.
More quantity of goods and services because general price level is decreasing in the inflate in the deflation now what is this inflation this inflation is the decrease in inflation rate over a given period of time so if inflation rate decreases from five.
Percent to three percent then we have this inflation so keep in mind that during this inflation the inflation rate is positive whereas in deflation the inflation rate is negative here also the purchasing power of money increases because inflation rate is decreasing.
But in this inflation it is positive in deflation inflation rate is negative now what is the reflation reflection is a policy to boost the output to increase the output in the economy or restrain the effects of disinflation.
So for example cut in tax rates rise in government expenditure lowering the interest rates rise in the money supply these policies can actually boost the output in the economy or help us to restrain the effects of this inflation so basically to to curb the deflationary pressure in the economy.
Government or the central bank uses the policies to restrain the effects of disinflation and that is known as reflation so in this video we have discussed the idea of inflation deflation disinflation.
And reflation if you find this video useful kindly like share and subscribe to our youtube channel crack economics and statistics thank you you