Answer:
Inflation values rise while deflation values fall.
If the economy goes through consecutive periods of deflation, the economy is in a deflationary spiral.
Step-by-step explanation:
Inflation:
This refers to the general increase in prices of goods and services in an economy over time.
When there is inflation, the purchasing power of a unit of currency decreases because you need more money to buy the same goods and services.
Deflation:
In contrast, deflation is the general decrease in prices of goods and services.
During deflation, the purchasing power of a unit of currency increases as prices fall.
If the economy goes through consecutive periods of deflation, the economy is in a deflationary spiral:
Deflationary Spiral:
This occurs when a persistent and self-reinforcing decline in prices leads to lower spending, lower production, and further deflation.
In a deflationary spiral, individuals and businesses delay spending and investment in anticipation of even lower prices in the future, contributing to a downward economic spiral.
Thus,
Inflation values rise, reducing the purchasing power of currency, while deflation values fall, increasing the purchasing power; consecutive periods of deflation can lead to a deflationary spiral, causing economic decline.