Discuss the advantages and disadvantages of deflation?

Answer 1

As deflation is a decrease in the price level, there is also a proportional increase in the purchasing power of a dollar. Those who have saved money will be able to buy more than previously, and banks will earn more (real) interest on loans made. Those who borrow money, however, will be be paying a higher (real) rate of interest (even with a fixed rate loan).

Answer 2

Advantages of inflation are adjustment of relative prices and wages along with boost of growth. Disadvantages include damaged period of boom and bust economic cycle, non competitive economy and reduced value of saving. On the other hand disadvantages of deflation are reduced spending, low profit and increased borrowing. Advantage of deflation is decrease in rate of commodities.

Answer 3

Advantages of inflation include a boost to economic growth, wages can also be boosted, and it allows for price adjustment. Disadvantages of inflation include a decrease in investments, and a loss of international competitiveness.

Answer 4

Advantages of Inflation:

1) Devalued currency

2) Plunges debt value

3) Stock value increases

4) Assets value increases

5) Lower unemployment rates

Disadvantages of Inflation

1) Disposable income/spending power decreases

2) Wage increases

3) Lenders suffer because of devalued currency

4)Lower competitiveness

Answer 5

Deflation is when a currency becomes worthless. An Advantage of deflation is that there is less poverty and things become more affordable.