Deflation And Inflation

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An Analyzation of Deflation and Inflation Whether the world sees falling prices or rising prices is a day to day change. These rising and falling prices are known as inflation and deflation. Inflation is an increase in all of the prices of goods and services in the economy, while deflation is the decrease of all prices. These price changes are written about in hundreds of articles everyday all around the world. I recently read two articles published by The Economist while compiling information for this paper. The articles were on the recent shifts in our global economy into deflation, despite our need and want for a gradual inflating economy. The first of these two articles, titled “The high cost of falling prices; Deflation” used…show more content…
Gasoline prices can be directly related to oil. In 2014, “a barrel of Brent crude cost $110,” but in 2015 it cost only “$60” (“The high cost of falling prices; Deflation.” Economist. 21 Feb. 2015: 69. eLibrary. Web. 22 Mar. 2016.). The barrel of crude oil was hence cut by “45%” and “in America the price of gasoline has fallen by 35%” (“The high cost of falling prices; Deflation.” Economist. 21 Feb. 2015: 69. eLibrary. Web. 22 Mar. 2016.). As you can see here because crude oil is a main component of gasoline, their prices correlate - meaning that when one price shifts downward the other will follow. Crude oil and gasoline are not the only products that have seen a decrease in value in the past few years. All around the United States and in many other areas of the world, the value of products are being slashed. Companies who manufacture new cars are being put up against deflation around the world. The price market for new cars has fallen and dealers of vehicles now have no incentive to innovate and increase safety standards. Many may now face the question of why and how to stay in business. “The price of new cars is flat in Britain, slowly sliding in Portugal and tumbling in Greece, where a new motor is nearly 20% cheaper than in 2005” (“The high cost of falling prices; Deflation.” Economist. 21 Feb. 2015: 69. eLibrary. Web. 22 Mar. 2016.). The value of durable
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