1. Inflation, Deflation,
Stagflation &
Reflation
By,
Jagath Khatri

2. Inflation
 Meaning;
Inflation is a rise in general level of prices of
goods & service in an economy over a period of
time.
 Definition;
 Crowther- defines inflation as “a state in which
the clause of money is falling i.e., prices are
rising.
 Prof.Coulbourn- defines inflation as “too much
of money chasing too few goods”

3. Causes of Inflation
 Changes in money supply.
 Change in disposable income.
 Changes in business and consumer
expenditure.
 Changes in demand of goods and services.

4. Effects of Inflation
 Effect on production and employment.
 Effect on fixed income group.
 Effect on debtors and creditors.
 Effect on wage and salary earners.
 Effect on farmers.

5. Deflation
 Meaning;
Deflation is a decrease in the general price
level of goods and services.
 It occurs when the inflation rate falls below 0%.
 It increases the real value of money of a nation,
this allows one to buy more goods with same
amount of money.

6. Causes of Deflation
 Shift in supply & demand curve.
 Reduction in money supply.
 Technological development.
 Increases in supply of goods & Decrease in supply
of money.
 Cash building.
 Fall in demand causes fall in price

7. Effects of Deflation
 Decreasing nominal prices for goods &
services.
 Increasing buying power of cash money.
 Decreased investment.
 Benefits recipient of fixed income.

8. Stagflation
 Meaning;
Stagflation is a combination of Stagnation &
Inflation, a situation where an inflation rate is
high, the economic growth rate slows down, &
unemployment remains steadily high.
 Causes;
 Supply Shock
 Inappropriate macro economics policies

9. Effects of Stagflation
 Reduction in the value of money
 Increase in prices of goods
 High Unemployment
 Poor economic growth
 Effect on fixed income group

10. Reflation
 Meaning;
Reflation is the act of stimulating the economy
by increasing the money supply or by reducing
taxes, there by seeking to bring the economy
back up to the long-term trend, following a dip in
the business cycle.
 Reflation is considered to be an antidote to
deflation