The term inflation describes a steady increase in an economy's general level of prices, as measured by the changing cost of a "market basket" of the goods and services that the typical American household might purchase. Economists recognize two principal types and sources of inflation: in the cost of the components used to make products, such as labor and materials, the total cost of the good or service. This type of inflation, called cost-push inflation, results when the costs of production increase and induces manufacturers to their prices to protect their ability to make a profit. . in the supply of money (or credit) that can be used to purchase the products increase product prices. This type of inflation, called demand-pull inflation, results when the supply of goods and services available for purchase is than the supply of money (or credit) that be used to the products. What is the opposite of inflation, and how does it affect an economy? which is a broad sustained decrease in the prices of goods and The opposite of inflation is services. This phenomenon creates a strong expectation in the minds of consumers-who will not purchase unless prices continue to decline. It also: Reduces employment and worker incomes I Increases corporate spending Increases home values Reduces corporate sales and profits