INFLATION -VS- DEFLATION

Both inflation and deflation have evil effects on a country, the contrasts between the two situations are stated below:

INFLATION
1) 2) 3) 4) There is rise in prices of goods and factors of production. Employment increases. The GNP increases because industry and commerce expand. The money value of the National Income increases. The Real National Income also increases but not in proportion to the Money National Income. The income and wages of workers may increase, but since the prices increase the cost of living increases. Since under both inflation and deflation man-distribution of production, money and income occurs. At times of inflation certain income groups gain but the fixed income group suffer. Inflation can be controlled to a certain extent and by certain methods. A nation under the sway of inflation especially in the case of hyperinflation tends to indulge in overoptimism. The flow of money misleads people towards gambling and other ill-practices.

DEFLATION
There is fall in prices of goods and services. Unemployment increases. Industry and Commerce are reduced. Both the Money and the Real National Income are reduced.

5)

6)

Prices are lower but since employment is low the workmen find it difficult to get money for their living. The fixed income group gains but all the other groups suffer. The GNP decreases and there is distribution of poverty.

7)

8)

Deflation on the other hand, once inflicted upon the economy knows no limit and the way out is very difficult. If a nation is caught in the grip of deflation the entire country suffers from pessimism.