(I’m American) Inflation is the rising cost of goods and services. Inflation constantly goes up by varying degrees. When economists say “inflation is decreasing”, that just means that the rate of inflation has slowed, not that inflation reversed.
If inflation is causing money to be less valuable over time, why would it be bad to have deflation? Would that not make my money more valuable? I’ve been told it would be very bad, but not in a way that I understand
In: Economics
Deflation would be the result of demand growing slower than supply, and so suppliers reducing prices in order to sell their stock.
The problem is them having less revenue to cover their costs. Eventually they’re going to go into survival mode, ie. cutting their costs. The largest cost is usually labour costs – and so job layoffs occur.
As more people lose jobs, theres less people buying stuff, and so prices go down even further.
This is basically a recession and a shrinking economy. Less demand for goods means less need for jobs.
Overall, people will begrudgingly accept that prices will go up. Being unemployed is far less tolerable.
Money’s loss of value is intentional. It’s just paper, metal coins and numbers on screen. But in being spent and triggering a need for more goods and services, along with investing into businesses, it creates jobs – and tax revenue that comes as a result of economic activity. Money isn’t printed for the purposes of hoarding.
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