What Is the Difference Between ‘Inflation’ and ‘Deflation’?

Imagine you have a piggy bank with your favorite candies. If the price of each candy goes up every week, that's like inflation, everything costs more. But if one day, the price of all the candies drops, and you can buy twice as many for the same amount of money, that’s deflation, everything gets cheaper.

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Examples

  1. Your favorite candy used to cost $1, but now it's $2 because of inflation.
  2. You buy a toy for $10 today, but next year the same toy costs only $8, that’s deflation!
  3. When your parents buy groceries every week and notice that prices are going up, that’s inflation.

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Categories: Economics · Inflation,Deflation,Money,Economics Basics