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What is Deflation and What Causes it to Occur?
DEFINING INFLATION AND DEFLATION
Webster's says, "Inflation is an increase in the volume of money and credit relative to available goods," and "Deflation is a contraction in the volume of money and credit relative to available goods." To understand inflation and deflation, we have to understand the terms money and credit.
DEFINING MONEY AND CREDIT
Money is a socially accepted medium of exchange, value storage and final payment. A specified amount of that medium also serves as a unit of account.
According to its two financial definitions, credit may be summarized as a right to access mo…
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