Deflation and inflation are two economic concepts related to the changes in the overall price levels in an economy. Inflation: Inflation is the increase in the general price level of goods and services over a period of time. It erodes the purchasing power of money, meaning that the same amount of money can buy fewer goods and services. Inflation can be caused by various factors, including increased demand, rising production costs, changes in the money supply, or government policies. Types of inflation: Demand-Pull Inflation: Occurs when demand for goods and services exceeds supply, leading to rising prices. Cost-Push Inflation: Results from an increase in production costs, such as wages or raw materials, passed on to consumers at higher prices. Deflation: Deflation is the opposite of inflation and refers to a decrease in the general price level of goods and services over time. In a deflationary environment, the purchasing power of money increases, meaning that the same amount of money can buy more goods and services. Deflation can be caused by factors such as decreased demand, falling production costs, or tight monetary policies. Why Deflation May Be Worse Than Inflation: Impact on Borrowers: In a deflationary environment, the value of money increases over time. This means that the amount of debt borrowers owe remains the same in nominal terms but becomes more burdensome in real terms. Borrowers may struggle to repay loans, leading to increased defaults and potentially c