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Disinflation and Deflation definitions

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  • Disinflation
    A period when the rate of price increases slows, but prices continue to rise at a reduced pace compared to previous years.
  • Deflation
    A situation where the overall price level falls, resulting in a negative rate of inflation and lower prices than the prior year.
  • Inflation Rate
    A measure indicating how quickly prices are rising or falling, often expressed as a percentage change over time.
  • Price Level
    An aggregate measure reflecting the average prices of goods and services in an economy at a given time.
  • Contractionary Monetary Policy
    A central bank strategy that reduces money supply and raises interest rates to curb inflation, often increasing unemployment.
  • Phillips Curve
    A graphical representation showing the inverse relationship between inflation and unemployment in the short run.
  • Short Run Phillips Curve
    A curve illustrating how inflation and unemployment trade off temporarily before expectations adjust.
  • Long Run Equilibrium
    A state where unemployment returns to its natural rate and inflation stabilizes after policy adjustments.
  • Natural Rate of Unemployment
    The typical level of joblessness in an economy, unaffected by short-term policy changes or cyclical fluctuations.
  • Monetary Policy
    Actions by a central bank to influence money supply and interest rates, impacting inflation and economic activity.
  • Fiscal Policy
    Government decisions on spending and taxation that affect aggregate demand and can influence inflation.
  • Aggregate Demand
    The total demand for goods and services within an economy, influencing price levels and inflation.
  • Inflation Expectations
    Beliefs held by workers and firms about future price increases, which can shift economic curves and affect outcomes.
  • Consumer Price Index
    A statistical measure tracking changes in the cost of a fixed basket of goods and services over time.
  • Budget Deficit
    A financial situation where government expenditures exceed revenues, often leading to increased aggregate demand.