Difference between Inflation and Deflation

Deflation

Deflation is a decrease in the general price level of goods and services. It occurs when the inflation rate falls below 0%. Inflation reduces the value of currency over time, but deflation increases it. This allows more goods and services to be bought than before with the same amount of currency. It is the opposite of inflation, which is the rate at which the cost of goods and services rise over time. When inflation rises, the value of the dollar goes down because consumers aren’t able to buy as much as they previously could.

Inflation

It is a sustained increase in the general price level of goods and services in an economy over a period of time. When the general price level rises, each unit of currency buys fewer goods and services; consequently, inflation reflects a reduction in the purchasing power per unit of money – a loss of real value in the medium of exchange and unit of account within the economy. The opposite of inflation is deflation, a sustained decrease in the general price level of goods and services. The common measure of inflation is the inflation rate, the annualized percentage change in a general price index, usually the consumer price index, over time.

Deflation vs Inflation

Comparison

Inflation

Deflation

Meaning When the value of money decreases in the international market, then this situation is termed as inflation. It is a situation, when the value of money increases in the international market.
Effects Increase in the general price level Decrease in the general price level
National income Does not declines Declines
Gold prices Falls Rises
Classification Demand pull inflation, cost push inflation, stagflation and deflation. Debt deflation, money supply side deflation, credit deflation.
Good for Producers Consumers
Consequences Unequal distribution of income. Rise in the level of unemployment
Which is evil? A little bit of inflation is a symbol of economic growth of the country.  It is not good for an economy.