Inflation and Deflation are the fundamentals of economic and personal Finance. It occurs when the price of goods and services rise, while deflation occurs when those prices decrease.
For any economy, the rise in price is good than the fall in price. These two factors have a huge influence on personal financial planning. This article will deal with the merits, demerits of both Inflation and Deflation and their role in personal finance.
By the end of this article, as an individual, you will understand the advantages of both parameters and take leverage of your personal wealth.
Let us understand to focus on a deal with these both definitions.
Inflation:
It is a measure of how quickly the price of goods in an economy is increasing. Inflation is caused when goods and services are in high demand, thus creating a drop-in availability.
A healthy inflation rate (2-3%) is considered positive because it directly results in increasing wages and corporate profitability and maintains capital flowing in a growing economy.
Deflation:
Deflation occurs when too many goods are available or when there is not enough money circulating to purchase these goods. As a result, the price of goods and services drops.