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Disinflation and Deflation definitions

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  • Disinflation
    A period when the inflation rate remains positive but consistently decreases, often due to policy actions targeting price stability.
  • Deflation
    A situation where the overall price level falls, resulting in a negative inflation rate and lower prices than the previous year.
  • Inflation Rate
    A measure indicating the percentage change in the general price level over a specific period, often used to assess economic trends.
  • Contractionary Monetary Policy
    A central bank strategy involving reduced money supply and higher interest rates to lower inflation, often raising short-run unemployment.
  • Federal Reserve
    The central banking system of the United States, responsible for implementing monetary policy to influence inflation and employment.
  • Phillips Curve
    A graphical representation showing the inverse relationship between inflation and unemployment in the short run.
  • Short Run Phillips Curve
    A curve illustrating the trade-off between inflation and unemployment before expectations adjust in the economy.
  • Natural Rate of Unemployment
    The long-term equilibrium unemployment rate where the economy is stable, unaffected by short-term policy changes.
  • Expectations of Inflation
    Beliefs held by workers and firms about future price increases, influencing wage demands and economic behavior.
  • Equilibrium
    A state where economic forces such as supply and demand or inflation and unemployment are balanced, with no inherent pressure to change.
  • Aggregate Demand
    The total demand for goods and services within an economy at a given overall price level and time period.
  • Budget Deficit
    A fiscal condition where government expenditures exceed revenues, often leading to increased aggregate demand.
  • Consumer Price Index
    An index tracking changes in the average price of a basket of goods and services, used to measure inflation or deflation.
  • Price Level
    The average of current prices across the entire spectrum of goods and services produced in the economy.
  • Monetary Policy
    Actions by a central bank to manage the money supply and interest rates, aiming to achieve macroeconomic objectives like price stability.