Difference Between Inflation And Disinflation

Inflation is the “increase in the general price level of goods and services in an economy” (Heakak, 2017). Inflation can be broken down into different types, resulting from different situation in the economy. When there is a change in the supply side of the economy, cost-push inflation occurs. On the other hand, when there is a change in the demand side of the economy, demand-pull inflation occurs (Surbhi, 2017). Deflation and disinflation help to describe the level of inflation is in an economy. In this essay, cost-push inflation is compared to demand-pull inflation while deflation is compared to disinflation.
Cost-Push Inflation occurs when the prices are increased due to an increase in the cost of the factors of production because of a …show more content…
Every output costs the firm extra due to the need for more hours of labor, or extra equipment to keep up with the demand (Heakak, 2017).
Disinflation is the rate at which inflation is decreasing (Nickolas, 2015). When the rate of inflation is falling, there is “slow growth and higher unemployment” (Kenny, 2017). According to “What Is the Difference Between Deflation and Disinflation” from The Balance, “A certain degree of inflation is a positive development that indicates an economy in reasonably good health” (2017). The issue occurs when inflation increases rapidly, the value of money decreases. This action in the economy forces people to spend rather than save, leading to even greater rise in inflation.
Deflation is the opposite of inflation, prices fall (Kenny, 2017). According to “What is the Difference Between Deflation and Disinflation” from Investopedia, “If there is a higher supply of goods and services but there is not enough money supply to combat this, deflation can occur,” (Nickolas, 2015). The article used cell phones as an example. It stated that technological advances in cellphones has increased allowing for supply to increase faster than money even though the prices have decreased (Nickolas, …show more content…
(2017, February 03). Cost-Push Inflation Versus Demand-Pull Inflation. Retrieved
October 07, 2017, from http://www.investopedia.com/articles/05/012005.asp
Kenny, T. (2017, April 20). What Is the Difference Between Deflation and Disinflation?
Retrieved October 07, 2017, from https://www.thebalance.com/the-difference-between-deflation-and-disinflation-41688
Nickolas, S. (2015, March 24). What is the difference between deflation and disinflation? Retrieved October 08,2017. From http://www.investopedia.com/ask/answers/032415/what-difference-between-deflation-and-disinflation.asp Surbhi, S. (2017, April 20). Difference Between Demand-Pull and Cost-Push Inflation (with Comparison Chart). Retrieved October 08, 2017, from