Inflation, Deflation & Disinflation
- Inflation is the sustained increase in the average price level of goods/services in an economy
- Deflation occurs when there is a fall in the average price level of goods/services in an economy
- Deflation only occurs when the percentage change in prices falls below zero %
- Deflation only occurs when the percentage change in prices falls below zero %
- Disinflation occurs when the average price level increases but at a decreasing rate than before
- These figures demonstrate disinflation: Y1 = 5% Y2 = 4% Y3 = 2%
Diagram: UK Inflation, Disinflation and Deflation
Between 2013 and 2015, the UK experienced disinflation, with inflation falling from 3.5% to just on 0%. From 2021, it experienced sustained inflation, rising to 4.2%