Macroeconomics - Inflation, Disinflation and Deflation Term Paper

Macroeconomics - Inflation, Disinflation and Deflation - Term Paper Example The paper outlines that the global financial crisis has led the whole world to think of taking the radical measures through which the financial situation of the globe can be improved. The global recession spread across Europe and US has also caused everyone to become indebted. This situation serious attention and the first thing that the economists need to do are to review the macroeconomic policies in their respective economies in order to reform them. The most dangerous economic ailment that is also considered as a potential cause of economic recession is inflation, which is known as the sustained rise in the general level of prices for the goods and services. Due to the inflation, the monetary value liquidates and although people have same amount of money, but their buying power is reduced. Therefore, the purpose of the report is to make the readers understand some of the basic yet alarming principles of macroeconomics that are leading the current financial situation in to its worst era. Apart from the causes and effects of inflation, the disinflation, and deflation will also be discussed. In the end, the conclusions and recommendations will be made concerning how the inflation and its forms can be overcome. The main conclusion from the study is that inflation and deflation are the two driving forces that drag the prices sometimes up and sometimes down. The rise in the inflation leads to rise in supply and decline in demand, where as the deflation rise will result in the decline in supply and rise in demand, and this cycle goes the same way.