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inflation or deflation - (This relationship between the over-supply-side and over-demand-side)

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Inflation

 The term "inflation" originally referred to increases in the amount of money in circulation, and some economists still use the word in this way. However, most economists today use the term "inflation" to refer to a rise in the price level. An increase in the money supply may be called monetary inflation, to distinguish it from rising prices, which may also for clarity be called 'price inflation'



Economists generally agree that in the long run, inflation is caused by increases in the money supply. However, in the short and medium term, inflation is largely dependent on supply and demand pressures in the economy 



  Other widely used price indices for calculating price inflation include the following:
 Producer price indices (PPIs) which measures average changes in prices received by domestic producers for their output. This differs from the CPI in that price subsidization, profits, and taxes may cause the amount received by the producer to differ from what the consumer paid. There is also typically a delay between an increase in the PPI and any eventual increase in the CPI. Producer price index measures the pressure being put on producers by the costs of their raw materials.






Deflation
 

 In economics, deflation is a decrease in the general price level of goods and services.Deflation occurs when the inflation rate falls below 0% (a negative inflation rate). This should not be confused with disinflation, a slow-down in the inflation rate .


 Economists generally believe that deflation is a problem in a modern economy because of the danger of a deflationary spiral (explained below)



In more recent economic thinking, deflation is related to risk: where the risk-adjusted return on assets drops to negative, investors and buyers will hoard currency rather than invest it, even in the most solid of securities. 

 Demand-side causes are:
 Growth deflation: an enduring decrease in the real cost of goods and services resulting in competitive price cuts.
 
  Supply-side causes are:
 Bank credit deflation: a decrease in the bank credit supply due to bank failures or increased perceived risk of defaults by private entities or a contraction of the money supply by the central bank.


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