What are main Difference between inflation and deflation in points?

Answer 1

Inflation:

1. Inflation redistributes income in the favor of the rich and the profiteer class at the cost of the poor masses - the wage-earners and consumers.

2. Through its redistributive effects, inflation increases the inequality of income in the community by widening the gulf between higher income groups and lower income groups. The rich become richer and the poor become poorer during inflation.

3. Inflation is regressive in effect in the sense that it hits hard those who are already weak and cannot protect themselves. It is specially the middle class which suffers most due to inflation.

Deflation:

1. Deflation means falling prices in general which adversely affect the marginal efficiency of capital. Consequently, investment volume tends to contract causing unemployment to increase.

2. Deflation paves the way for depression. In a depressionary phase, economic activity contracts, scale of production is curtailed, output shrinks no new investment if forthcoming; on the contrary, investment is curtailed.

3. By reducing aggregate income, it also pauperizes every group in society. It inflicts on society the harsh punishment of mass unemployment.