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The effect is mainly on people. For example in a period of deflation your pay should go down in order to remain at the same purchasing power. Can you imagine
by rogerbinns 14y ago
The effect is mainly on people. For example in a period of deflation your pay should go down in order to remain at the same purchasing power. Can you imagine how people behave when told they are really getting a pay increase when their pay goes down by 2% and deflation is 4%? Inflation means prices/wages automatically go down when no numerical change is made. This keeps people happier.
Consequently inflation is preferable out of the two, but a small number close to zero and stable over many years is the most preferable.