Inflation & Deflation
Master the dynamics of price changes and their profound impact on purchasing power, savings, and economic stability
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0 / 5 completedThe Price Level Paradox
Imagine saving $10,000 under your mattress for 20 years. When you finally retrieve it, you discover something shocking: while you still have $10,000, it now buys what $6,000 used to purchase. Your money didn't disappear—its purchasing power eroded through inflation.
Conversely, deflation—when prices fall—sounds like a consumer's dream. But Japan's "Lost Decades" since 1990 revealed the nightmare: consumers delay purchases expecting lower prices tomorrow, businesses can't profit, unemployment rises, and economies spiral downward.
Why This Matters
Understanding inflation and deflation is crucial for personal finance decisions (saving, investing, borrowing) and for grasping how central banks shape our economic reality. This module equips you to navigate price level changes confidently.