If you want to understand more about what's going on in your financial life, it might be interesting to start getting to know better the meaning of the terms deflation and inflation.

Both terms are economic indicators used to measure the financial health of the economy of a country, city or state.

From them, it is possible to know if now is a good time to take out loans or to make larger purchases. It can also show if we are in a time of high unemployment and lower monthly income.

Therefore, if you are thinking of carrying out a large financial action, such as financing or a loan, it is essential to know what hyperinflation, deflation and inflation mean. In this article, you will learn more about these terms. Check out!

Let's start by getting to know more about inflation, which is a much-spoken term and whose meaning is a little better known by the Brazilian people, since this indicator is often shown in the media.

Thus, inflation is an event where there is a general increase in the prices of products and services. From that high, people end up losing their purchasing power a little because they need to add more money to purchase certain items.

There are many reasons why inflation rises, but here we can highlight three main factors that influence this economic indicator.

First, there are government actions. Thus, when they carry out public spending without good planning, it may be necessary to increase the amount of taxes to cover the debt. This makes the products more expensive.

Second, there is the increase in the cost of producing products. This causes the final product to end up having its value increased to meet these expenses, making the consumer pay more.

Finally, the third factor that causes inflation to rise is the low production of goods, which ends up causing an imbalance in the relationship between supply and demand.  

In this sense, when people have a greater need to buy a product whose production is impaired, the value of that product tends to rise.

An example of this scenario is in relation to the automobile, which during the pandemic ended up becoming more expensive due to the low production of the item.

Now that you know what inflation is, it's common to think that deflation can be a movement contrary to it or even a little more beneficial. But in reality, deflation is a negative economic phenomenon for people.

Thus, deflation happens when there is a drop in the value of products and services in the market. However, this drop is usually caused when there are not many consumers to buy that particular product.

In this way, the companies that produce the goods end up having to lay off employees and lower the value of the products in order to achieve any sales results.

However, this movement ends up generating a high unemployment rate, which directly affects the monthly income of families and causes them to stop consuming so much, since they do not have the money to pay.

Deflation can usually occur when there is a low movement of the currency in the country, making the money circulating less.

So people don't buy as much and companies can't invest in their businesses.

Finally, the last economic indicator that we need to know better is hyperinflation, which by its name already means that it means more exaggerated inflation.

Therefore, hyperinflation happens when the price of products and services ends up rising very quickly and out of control.

In this way, hyperinflation causes the country's currency to end up being devalued and people's purchasing power becomes much lower due to high prices.

In summary, after getting to know a little better about the definition of each of the economic indicators, it is even a little easier to understand the main differences between them.

The main difference between inflation and deflation is that one causes a higher price on products and the other causes the same products to be priced lower due to low market demand.

In both models the consumer ends up losing some of his purchasing power. Thus, in inflation he cannot buy due to high values and in deflation he cannot buy due to lack of income.

Thus, these two indicators end up generating a bad economic scenario for both those who buy and those who sell.  

In this sense, we can observe that in the scenario of inflation, companies may even receive more, but they also need to spend more money when investing in the business.

In the case of deflation, companies are unable to invest more in their businesses due to lack of money, which makes them need to cut costs and reduce the sales value of products, making profit much lower.

Now, looking at these two economic indicators, we can see that the difference between them is very similar to those indicated in the previous topic.

Therefore, the main difference between hyperinflation and deflation is that there is a very rapid increase in product prices causing the public to lose purchasing power.

Already in deflation, there is a drop in the price of products, but not quickly but a little slower.

Finally, the main difference between these two economic indicators is the time they can take place.

Here we already know that hyperinflation occurs very quickly and exaggeratedly causing a devaluation of the currency. In that sense, when it happens, there are few actions we can take to avoid it.

In the case of inflation, it happens a little more slowly and we can see this movement happening in the financial market.

In this way, despite inflation increasing the value of products and this variation occurring slowly, it allows the public sector to be able to implement actions to make it not grow so much.

If you enjoyed understanding the difference between inflation, deflation and hyperinflation better, it might be super interesting to continue learning more about the main indicators of our economy.

Therefore, another very cool indicator for you to know is the GDP, which can help you understand whether the economy is doing well or badly. So, read the recommended content below to check it out.