Disinflation facts for kids
Disinflation is a term used in economics to describe when the prices of goods and services are still going up, but at a slower speed than before. Imagine a car that is speeding up, but then the driver starts to press the brake a little. The car is still moving forward, but its speed is decreasing. In the same way, disinflation means that the speed at which prices are rising is slowing down.
Understanding Disinflation
Disinflation happens when the rate of inflation decreases. Inflation is when the general prices of goods and services in a country go up over time. For example, if a candy bar cost $1 last year and $1.05 this year, that's inflation. Disinflation means that these price increases are becoming smaller. So, if prices were going up by 5% last year, and now they are only going up by 3%, that's disinflation. Prices are still rising, but not as quickly. This is different from reflation, which is when prices start to rise again after a period of falling or slow growth.
The overall value of all goods and services produced in a country is called its Gross Domestic Product (GDP). When economists talk about disinflation, they are looking at how the general price level of these goods and services changes across the entire economy.
Disinflation vs. Deflation
It's important to know that disinflation is not the same as deflation. Deflation is when the general prices of goods and services actually start to fall. With disinflation, prices are still increasing, just at a slower pace.
Think of it this way:
- If the annual inflation rate was 5% one month and then 4% the next month, that's disinflation. Prices are still going up by 4% each year, but the rate of increase has slowed down by 1%.
- If the annual inflation rate was 1% one month and then -2% the next month, that's deflation. Prices are now actually falling by 2% each year. In this case, the rate of increase slowed down by 3% (from +1% to -2%).
So, disinflation is about the speed of price increases slowing down. Deflation is about prices actually going down.
See also
 | Sharif Bey |
 | Hale Woodruff |
 | Richmond Barthé |
 | Purvis Young |
