What is inflation and deflation in economics?

In economics, inflation and deflation are two important concepts that describe changes in the general price level of goods and services over time. These concepts can be defined as follows:

• Inflation: A sustained increase in the general price level of goods and services in an economy. It is measured as the percentage rate of change in the Consumer Price Index (CPI) or the Producer Price Index (PPI). High inflation can lead to a decrease in purchasing power for consumers and increase uncertainty for businesses.
• Deflation: A sustained decrease in the general price level of goods and services in an economy. It is also measured as the percentage rate of change in the CPI or PPI. Deflation can have negative effects on an economy as it decreases demand for goods and services and economic growth.

Inflation can be caused by a variety of factors such as an increase in the money supply, a decrease in the supply of goods and services, or an increase in production costs. On the other hand, deflation can be caused by a decrease in the money supply, an increase in the supply of goods and services or a decrease in production costs. Central banks and governments use various monetary and fiscal policies to target an appropriate inflation rate and prevent deflation.