IN LAYMAN’S TERMS, WHAT’S THE DIFFERENCE BETWEEN INFLATION, RECESSION, DEFLATION AND DEPRESSION?

Just curious. Please note which I asked for the definitions in layman’s terms.

{ 2 comments… read them below or add one }

Zenmeister March 23, 2010 at 7:33 am

inflation is when prices for goods go up.
Deflation is when prices of goods go down.
Recession is when Aggregate output goes down.
Depression is when aggregate output goes down by a lot.It is just a severe depression.

The real definition for inflation, at least according to me and many other free marketers, is an increase in the money supply.
And the real definition of a depression is a recession that a government intervenes in.

William N March 23, 2010 at 8:23 am

Inflation is when the money supply increases by more than the real economy does. This means that one unit of currency will buy less than it could in the past.
Deflation is when the money supply contracts, making a unit of currency able to buy more than it could in the past. This is the exact opposite of inflation, but it is also bad. If people think that their money will allow them to purchase more in the future than it can now, they tend to hoard it, With no one buying goods or services, the economy grinds to a halt, since everyone is waiting to buy until assets become available for less currency than is currently the case.
A recession is a decrease in the gross domestic product of a country. Think of it as the economy receding, this is a bad thing.
There is no strict definition of when a recession becomes a depression, it is more of a general sense that things are worse than in a normal recession. In the U.S., the last depression occurred in the early 1930’s, caused by the stock market crash and exacerbated by the protectionist sentiment of the time.

Leave a Comment

Previous post:

Next post: