Deflation and other things, Dispense di Inglese

Scarica Deflation and other things e più Dispense in PDF di Inglese solo su Docsity! Is this really deflation? In 2015, the UK has registered for the first time since 1960, a decline of -0,1% in CPI (consumer price index). This percentage represents “negative inflation”, that is often confused with deflation. The only difference between the two is that in the first case we can talk about a short-term event, while the second one is a longer-term phenom. According to Mark Carney, the governor of the Bank of England, “negative inflation” isn’t as dangerous as deflation. In fact, a temporary period of falling prices, allows anyone to increase consumption. So, the prices of basic products, like petrol or food, are good for everyone, for both consumers and entrepreneurs. For example, the farmer can buy food and fuel at low-cost. In addition, it’s important to underline that if prices fall, consumers will use only a part of the income. It means that we have money to spend on other things. This concept, however, affects only the primary goods, instead for optional goods, such as televisions, telephones, it is not convenient to buy them. “Negative inflation “has negative effects for debtors, as receiving low wages, they will no longer be able to cope with certain costs, such as the mortgage that remains fixed. We know that when prices rise, businesses in turn increase wages. The same thing happens with inflation. With falling prices, wages also fall. This can cause problems with productivity or even as regards interest rates, which move according to inflation trends.