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Price Stability Essay Topics & Paper Examples

Inflation and Deflation: The Issue of Price Stability

Inflation and deflation are subjects that are of great concern, especially with the world financial crisis hanging over our heads. The definition of inflation is the increase of the price level of goods and services in an economy over time. Deflation is viewed as its opposite and is taken as the decrease in price level of goods and services over a certain time period. Both of these two effects have their own special effects. Inflation is viewed as the general increase in price level. It occurs when the general basket of goods increases in price value. The use of a basket of goods is supposed to be an indicator of the economy‚Äôs position. So what causes inflation? Inflation occurs in…