Difference Between Inflation And Deflation

Difference Between Inflation And Deflation

The main dissimilarities or difference between inflation and deflation can be highlighted as follows:

1. Introduction

Inflation: It is the rate of rise in the price of goods and services and decrease in the value of money

Deflation: It is the rate of decrease in the price of goods and services and rise in the value of money.

2. Purchasing Power

Inflation: It reduces the purchasing power of money, so more money is required to fulfill daily needs .

Deflation: It increases the purchasing power of money, so less amount of money is required to fulfill the needs of people.

3. Price

Inflation: Rise in the price of necessary goods and services because of the decrease in the value of money.

Deflation: Fall in the price of goods and services because of the increase in the purchasing power of money

4. Effect On Saving

Inflation: It decreases the saving of individuals because more money is required to fulfill their needs

Deflation: It increases the saving of individuals because less money is needed to fulfill their needs

5. Good For

Inflation: It is good for high class or rich people because they can spend more money to buy goods and services 

Deflation: It is good for middle class and poor people because of fall in the price of products.

6. Effect On National Income

Inflation: It does not lower the national income

Deflation: There will be decrease in the national income of the nation

7. Unemployment

Inflation: It does not cause unemployment because producers want to increase their production capacity which helps to use idle resources and labors.

Deflation: It may cause unemployment in the long run because producers may decrease their production capacity.

8. Control

Inflation: It can be controlled by applying different techniques and monetary policies

Deflation: It is very difficult to control negative inflation or deflation.

9. Real Value Of Debt

Inflation: It causes devaluation of debt. So, the real value of debt will be reduced which makes easy for the debtors to pay loan.
Deflation: Real value of debt will be increased because of decrease in the value of money. So, it makes difficult for the debtors to repay loan.

   Also Read

Advantages And Disadvantages Of Inflation

Advantages And Disadvantages Of Deflation 

10. Harmful

Inflation: Mild or moderate inflation is not harmful for the economy
Deflation: Deflation is more harmful than inflation.

Inflation Vs Deflation (Comparison Chart)

Basis For Difference	Inflation	Deflation
Introduction	Decrease in the value of money and rise in the price of goods	Rise in the value of money and decrease in the price of goods
Purchasing Power	Decrease	Increase
Price	Rises	Falls
Saving	Decrease	Increase
Good For	Rich People	Poor People
National Income	Not affected	Decrease
Unemployment	No	Yes
Control	Easy	Difficult

I hope this post is helpful to understand the difference between inflation and deflation and to make comparison between them.