Inflation Meaning; Inflation is a rise in general level of prices of goods & service in an economy over a period of time. Definition; Crowther- defines inflation as “a state in which the clause of money is falling i.e., prices are rising. Prof.Coulbourn- defines inflation as “too much of money chasing too few goods”
Causes of Inflation Changes in money supply. Change in disposable income. Changes in business and consumer expenditure. Changes in demand of goods and services.
Effects of Inflation Effect on production and employment. Effect on fixed income group. Effect on debtors and creditors. Effect on wage and salary earners. Effect on farmers.
Deflation Meaning; Deflation is a decrease in the general price level of goods and services. It occurs when the inflation rate falls below 0%. It increases the real value of money of a nation, this allows one to buy more goods with same amount of money.
Causes of Deflation Shift in supply & demand curve. Reduction in money supply. Technological development. Increases in supply of goods & Decrease in supply of money. Cash building. Fall in demand causes fall in price
Effects of Deflation Decreasing nominal prices for goods & services. Increasing buying power of cash money. Decreased investment. Benefits recipient of fixed income.
Stagflation Meaning; Stagflation is a combination of Stagnation & Inflation, a situation where an inflation rate is high, the economic growth rate slows down, & unemployment remains steadily high. Causes; Supply Shock Inappropriate macro economics policies
Effects of Stagflation Reduction in the value of money Increase in prices of goods High Unemployment Poor economic growth Effect on fixed income group
Reflation Meaning; Reflation is the act of stimulating the economy by increasing the money supply or by reducing taxes, there by seeking to bring the economy back up to the long-term trend, following a dip in the business cycle. Reflation is considered to be an antidote to deflation