The most import
For more on the CPI, such as how it is constructed, its uses, and how it can be used to protect against inflation, refer to Why the CPI Is a Friend to Investors.
What causes inflation? How does it affect your investments and standard of living? The tutorial All About Inflation has the answers.
Deflation is a general decline in prices, often caused by a reduction in the supply of money or credit. Deflation can also be caused by a decrease in government, personal or investment spending. The opposite of inflation, deflation has the side effect of increased unemployment since there is a lower level of demand in the economy, which can lead to an economic depression.
Declining prices, if they persist, generally create a vicious spiral of negatives such as falling profits, closing factories, shrinking employment and incomes, and increasing defaults on loans by companies and individuals. To counter deflation, the Federal Reserve (the Fed) can use monetary policy to increase the money supply and deliberately induce rising prices, causing inflation. Rising prices provide an essential lubricant for any sustained recovery because businesses increase profits and take some of the depressive pressures off wages and debtors of every kind.
This is the opposite of inflation, which is characterized by rising prices (do not confuse deflation with disinflation, which is simply a slowing of inflation). To many economists, deflation is more serious than inflation because deflation is more difficult to control.
Equity prices begin to decline as people sell off their investments, which are no longer offering good returns, and bonds temporarily become more attractive.
This is a condition of slow economic growth and relatively high unemployment - a time of stagnation - accompanied by a rise in prices, or inflation.
Stagflation occurs when the economy isn't growing but prices are, which is not a good situation for a country to be in. This happened to a great extent during the 1970s, when world oil prices rose dramatically, fueling sharp inflation in developed countries. For these countries, including the
InvestingInflation and deflation are opposite sides of the same coin. When both are threatening, here's what to do to keep your portfolio safe.
MarketsDeflation is an economic term used to describe a period of declining prices for goods and services. Decreases in the money supply, government spending, consumer demand and business investment ...
MarketsInflation occurs when the prices of goods and services rise. Deflation occurs when prices decrease.
Personal FinanceWhile some inflation is good for economic growth, when prices begin to fall after an economic downturn, deflation may set in causing an even deeper crisis.
MarketsUnderstand how inflation is measured, how U.S. inflation compares to other countries, and if investors should be concerned with rising inflation.
MarketsAs a measure of inflation, this index can help you make key financial decisions.
Managing WealthWhen stocks are divided into growth and value categories, the evidence is clear that value stocks perform better in periods of high inflation, and growth stocks perform better during periods ...
MarketsBy Stephen Simpson Inflation is a key concept in macroeconomics, and a major concern for government policymakers, companies, workers and investors. Inflation refers to a broad increase in prices ...
MarketsInflation, or the general price level of all goods and services in an economy, has remained subdued in the years following the Great Recession. Given recent developments, is the U.S. on the verge ...
MarketsGeneral economic theory consensus rules that deflation is bad for the economy. But the Swiss economy, which is growing despite a drop in prices for the last four years, is proving otherwise. ...