deflation and disinflation

Question 1

what is deflation?

Answer 1

a sustained period of decreasing prices of goods/services where the prices are falling over time.

Question 2

why is deflation negative?

Answer 2

it indicates that people have less money to spend on goods/services (hinting at a decrease in consumer confidence) which decreases demand, so businesses have to reduce prices, resulting in reduced profit. It also indicates a fear of/ rising unemployment.

Question 3

what is disinflation?

Answer 3

when the rate of inflation is at a slower rate, prices are still rising, just slower than before.

Question 4

what happens to the real income of pensioners during deflation?

Answer 4

increases

Question 5

what is indirect tax?

Answer 5

VAT (20%), alcohol, tobacco

Question 6

what is a direct tax?

Answer 6

income tax, national insurance

Question 7

what happens to the real value of money compared to general prices during deflation?

Answer 7

real value of money increases, the value of general prices decreases