week 5

    The article explains some jargon that i'm not very familiar with. I believe that it will be useful in the future. It mostly focuses on inflation and deflation. Inflation refers to the rise in price of the products over time. Expert usually agree with a slightly inflation. It is healthy for a stable economy. There are some terms extend from inflation. For instance, hyperinflation, an inflation that is too high and can be as serious as out of control. Zimbabwe can be a good example. Stagflation is a combination of inflation and stagnation. The economy growth goes down while the price of products still increase. Deflation is when the price goes down for a long period of time. I once thought the falling price is better for people since people can buy what they want with less amount of money. However, that's not true. The article points out that deflation cause fear since it leads to increased unemployment and decreased consumer spending. This will end up in a bad cycle. People expect the price to go lower. As a result, they will wait for the price to go down before buying. This kind of phenomenon leads to more deflation and eventually result in depression.