Firstly, lets address the elephant in room~ inflation: the increase in prices of goods and services in an economy over a certain period of time. when the general price level rises, each currency unit buys fewer goods and services. thus, inflation results in loss of monetary value.
Another edgy woke way of looking at inflation is “too much money chasing too few goods”. this definition attributes the cause of inflation to monetary growth relative to the output / availability of goods and services in the economy.
There’s two types of inflation~ demand-pull inflation and cost-push inflation. the former increases prices due to an excess of demand over supply for the economy as a whole. demand inflation is what happens when supply cannot expand any further to meet demand— that is, when critical production factors are being fully employed. the latter type, “cost-push inflation” occurs when consumer prices rise due to increasing input costs. in general, there are three factors that could contribute to cost-push inflation; rising wages, corporate tax increases, and imported inflation.
Deflation: it’s the opposite of inflation, which refers to a sitch where price levels decline. thus, deflation occurs when the inflation rate falls below 0% (or goes neg). deflation increases the real value of money and allows one to buy more goods with the same amount of money. this can happen when the money and credit supply reduces, or if the government reduces spending and/or consumer stops spending.
Stagflation: refers to economic condition where economic growth is either slowing down or growing stagnant while prices are rising. side effects of stagflation are increase in unemployment combined with a rise in prices (or inflation). stagflation occurs when the economy isn’t growing but prices are going up. this happened at a macro-level during mid 70’s when oil prices rose sharply, fuelling sharp inflation in developed countries.
Hyperinflation: a sitch where the price increases are too sharp. this occurs when there’s a yuge increase in the money supply, which isn’t supported by GDP growth. this usually results in a supply/ demand imbalance for the monetary system.
Headline inflation: refers to a measure of total inflation, which is not adjusted for seasonality or for the volatility of commodities & energy prices, which are removed in the CPI. headline inflation will oftentimes be quoted on an “annualized basis, which means a monthly headline figure of, say, 4% inflation equates to a monthly rate that, if repeated for a full year, would create 4% inflation for the year.” comparisons of headline inflation are typically made on a year-over-year basis. this is commonly referred to as “top-line inflation”.