Question

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1- Describe the impact of inflation to the value of currency and economy of country. What is the different between inflation and deflation

Answer 1

Question-1.Describe the impact of inflation to the value of currency and economy of country. What is the different between inflation and deflation.

Answer- Inflation refers to rise in the prices of goods and services like food, clothing etc.

Inflation is an indicator of a decrease in the purchasing power of a country's currency.Due to inflation the purchasing Power of a currency decreases as good and services gets costlier.

Inflation in a country affects the cost of living in that particular country or nation, this leads to decline in economic growth.

• Difference between inflation and deflation-

-Inflation means increase in the aggregate price level of goods and services in the economy whereas deflation refers to decrease in the aggregate price level in the economy

-inflation is caused by Either demand factors, known as demand pull inflation or by supply factors known as cost push inflation whereas deflation caused by reduction in money supply is called money supply side deflation and deflation caused by credit factors is called deflation.

-Moderate inflation is considered good for the economy whereas deflation is considered bad for the economy but good for the consumers.

-Inflation lead to decrease in the purchasing power of money whereas deflation leads to increase in the purchasing power of money.