opposite of inflation

Inflation is caused when goods and services are in high demand, thus creating a drop-in availability. Supplies can decrease for many reasons; a natural disaster can wipe out a food crop, a housing boom can exhaust building supplies, etc. Whatever the reason, consumers are willing to pay more for the items they want, causing manufacturers and service providers to charge more. Deflation, conversely, is the general decline in prices for goods and services, indicated by an inflation rate that falls below zero percent. Inflation is an increase in the general prices of goods and services in an economy. Deflation and debt has the opposite affect as inflation. Debtors will pay back more money than they comparatively took out and creditors will receive more money.

Synonyms, Antonyms & Associated Words(0 00

Finally, a lesser-known benefit of positive inflation is the improvement of employer flexibility on labor costs. Imagine an economic slowdown that reduces corporate incomes.

But as long as businesses and people feel less wealthy, they spend less, reducing demand further. They don’t care if interest rates are zero because they aren’t borrowing anyway. That deadly situation is called aliquidity trap and is a vicious, downward spiral.

opposite of inflation

Paraphrases For Inflation:

As wages deflate, people may have a harder time paying off debt, which will increase the number of opposite of inflation defaults by borrowers. Price inflation is a debtor’s best friend and a creditor’s worst enemy.

What are the 4 types of inflation?

There are four main types of inflation, categorized by their speed. They are creeping, walking, galloping, and hyperinflation. There are specific types of asset inflation and also wage inflation. Some experts say demand-pull and cost-push inflation are two more types, but they are causes of inflation.

When there are dislocations within financial markets, monetary policy has proven highly effective at restoring functioning markets. Similarly, fiscal policy is best utilized opposite of inflation countercyclically in conjunction with monetary policy. Regardless of which approach companies choose, there is new focus on ensuring supply rather than efficiency.

Hyponym For Inflation:

What is the real inflation rate?

Australia’s inflation target is to keep annual consumer price inflation between 2 and 3 per cent, on average, over time. The particular measure of consumer price inflation is the percentage change in the Consumer Price Index (CPI).

During World War I the British pound sterling was removed from the gold standard. The motivation for this policy change was to finance World War I; one of the results was inflation, and a rise in the gold price, along with the corresponding drop in international exchange rates for the pound. The Bank of Japan and the government tried to eliminate it by reducing interest rates and ‘quantitative easing’, but did not create a sustained increase in broad money and deflation persisted. In February 2009, Ireland’s Central Statistics Office announced that during January 2009, the country experienced deflation, with prices falling by 0.1% from the same time in 2008. This is the first time deflation has hit the Irish economy since 1960.

With labor costs largely fixed, a company may struggle to remain profitable. In a deflationary environment, companies have no such flexibility, and the negative effects on national employment from recessions would likely be more severe. Floating-rate notes offer coupons that rise and fall with key interest rates. The interest rate on a floating-rate security is reset periodically to reflect changes in a base interest rate index, such as the London Interbank Offered Rate . Floating-rate notes have therefore been positively, though imperfectly, correlated with inflation. Many commodity-related assets can also help cushion a portfolio against the impact of inflation because their total returns usually rise in an inflationary environment. However, some commodity-based investments are influenced by factors other than commodity prices.


Price inflation decreases people’s ability to pay for goods. The concept at a basic level says if an employee’s wages remain steady, but the cost of goods increases, then the employee can afford less goods.

Oil stocks, for example, can fluctuate based on company-specific issues and therefore oil stock prices and oil prices are not always aligned. Moderate inflation is associated with economic growth, while high inflation can signal an overheated economy. opposite of inflation The answer has to do with the relative value of the interest that a specific bond pays. Rising prices over time reduce the purchasing power of each interest payment a bond makes. Inflation means that $400 will buy less five years from now.

  • Among the notable examples of hyperinflation have been Germany in 1923, Hungary in 1946 , Yugoslavia in 1993–94, and Zimbabwe in 2008.
  • An unusually steep and sudden rise in prices, sometimes called hyperinflation, may result in the eventual breakdown of an entire nation’s monetary system.
  • Deflation in home prices after the financial collapse of 2008–9 significantly reduced the value of the assets of many American households and proved a significant strain on the U.S. economy.
  • Persistent deflation in Japan, beginning in the early 1990s, resulted in a drop in consumption, record unemployment, and general economic stagnation.
  • One cause of a decrease in demand for goods and services is an increase in interest rates.
  • Deflation, which historically has occurred in the downward movement of the business cycle, lowers prices and increases unemployment through the depression of business.

The Federal Reserve is tasked with controlling inflation. If the growth rate of the GDP exceeds 2-3%, demand can drive up prices leading to demand-pull inflation. Both inflation and deflation are under control in the United States. The current inflation rate reveals where the economy is at in the business cycle. It’s also measured by thePersonal Consumption Expendituresprice index, which includes more business goods and services than the CPI. Deflation is worse because interest rates can only be lowered to zero.

opposite of inflation

The drop in revenue then leads to salary cuts and job losses. Some causes opposite of inflation of increased supply are increased technology and lower production costs.

What is the biggest contributor to inflation?

Demand-pull inflation can be caused by strong consumer demand for a product or service. When there’s a surge in demand for goods across an economy, prices increase, and the result is demand-pull inflation.

Inflation Is No Better

They save and invest with confidence that the value of money will be stable over time. “Price stability” is opposite of inflation usually interpreted to mean a low and stable rate of inflation maintained over an extended period of time.

The Fed can also lower the reserve rate, the amount of money commercial banks must keep on hand. The Fed slows growth by tightening the money supply, they allow less credit into the market. This makes it more expensive to borrow money which slows growth and demand and brings prices back down.

Who is hurt by inflation?

Lenders are hurt by unanticipated inflation because the money they get paid back has less purchasing power than the money they loaned out. Borrowers benefit from unanticipated inflation because the money they pay back is worth less than the money they borrowed.

In our view, the ideal rate of inflation is zero, properly measured. Monetary policy could never eliminate every wiggle in the inflation rate; nor should policymakers try to do so. Given all of the inputs, it is fair to say that our current environment is likely to be at least somewhat deflationary. The implied inflation rate has declined sharply since the recent market peak on February 19th. Typically, there is a reasonably strong relationship between changes in the implied inflation rate and what is later reflected in the reported consumer price inflation numbers. Referring to the chart below, due to the recent drop in the implied inflation rate, we expect the reported CPI rate to decline sharply in the coming months. Compounding this deflationary pressure is the sharp decline in energy prices.

Full revival is expected by the summer, barring complications from secondary outbreaks. Should consumption bounce to the same degree, China’s economy will return opposite of inflation to full operation. If the supply of money grows faster than the demand for it, the result would be too many dollars chasing too few goods which is inflation.