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Why is in flation preferable to deflation? I appreciate this is largely due to the fact that deflation causes a large decrease in demand as people continually wait for prices to decrease, but if anyone has finer points I would be grateful.

John C
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  • I think the best duplicate match for this is http://economics.stackexchange.com/q/5861/44 – 410 gone Feb 06 '17 at 07:12
  • @EnergyNumbers My question was about no inflation vs inflation, not inflation vs deflation. You are right that its answers are better and are also applicable here. – Giskard Feb 06 '17 at 09:09

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I wouldn't necessarily agree that inflation is universally preferable to deflation. Each has positive and negative consequences. Inflation hurts savers, deflation hurts current consumers. A little inflation (let's say, 2% per year) is useful -- if nothing else, it helps deal with wage stickiness. Deflation, on the other hand, would be a godsend for a country like Venezuela where prices have been growing incessantly.

This is all to say that there isn't a single rule for inflation vs deflation. The broader economic context is critical.

Yevgeniy Feyman
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