Mainstream economic thought states that a moderate amount of inflation is good for economic growth, and most of the world's central banks target an annualized inflation rate of 2 to 3%. When inflation gets out of hand, prices rise too quickly for incomes to adjust, which can potentially lead to an economic crisis known as hyperinflation where prices inflate quickly and exponentially. If the rate of inflation begins to decrease, it is known as disinflation. Deflation occurs when the change in prices turns negative.
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Aggregate demand for goods services
Defaults on debts
Deflation hurts GDP growth
Economic crisis
Fiscal and Monetary Policy
Increase in unemployment
Increasing in government spending
Inflation for economic growth
Lowering taxed
Negative effects on economic stability
Negative effects on growth
Open markets
Operating full capacity
Purchasing private assets
Quantitative Easing QE
Recessions