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inflation, in economics, persistent and relatively large increase in the general price level of goods and services. Its opposite is deflation, a process of generally declining prices. The U.S. Bureau of Labor Statistics produces the Consumer Price Index (CPI) yearly, which measures average price changes in relation to prices in an arbitrarily selected base year. While the CPI is usually considered the most reliable estimate of inflation, some economists have questioned whether it overstates inflationary trends.

Inflation results from an increase in the amount of circulating currency beyond the needs of trade; an oversupply of currency is created, and, in accordance with the law of supply and demand, the value of money decreases. Deflation is brought about by the opposite condition. In the past, inflation was often due to a large influx of bullion, such as took place in Europe after the discovery of America and at the end of the 19th cent. when new supplies of gold were found and exploited in South Africa. In modern times wars have been the most common cause of inflation, as government borrowing, the increase in the money supply, and a diminished supply of consumer goods increase demand relative to supply and thereby cause rising prices.

Inflation stimulates business and helps wages to rise, but the increase in wages usually fails to match the increase in prices; hence, real wages often diminish. Stockholders make gains—often illusory—from increased business profits, but bondholders lose because their fixed percentage return has less buying power. Borrowers also gain from inflation, since the future value of money is reduced. Deflation, which historically has occurred in the downward movement of the business cycle, lowers prices and increases unemployment through the depression of business. Persistent deflation in Japan, beginning in the early 1990s, resulted in a drop in consumption, record unemployment, and general economic stagnation. Deflation in home prices after the financial collapse of 2008–9 (as opposed to deflation in goods and services prices) significantly reduced the value of the assets of many American households and proved a significant strain on the U.S. economy. An unusually steep and sudden rise in prices, sometimes called hyperinflation, may result in the eventual breakdown of an entire nation's monetary system. Among the notable examples of hyperinflation have been Germany in 1923, Hungary in 1946 (the worst recorded case), Yugoslavia in 1993–94, and Zimbabwe in 2008.

In the United States, annual price increases of less than about 2% or 3% are not considered indicative of serious inflation. During the early 1970s, however, prices rose by considerably higher percentages, leading President Nixon to implement wage-and-price controls in 1971. Stagflation–the combination of high unemployment and economic stagnation with inflation–became common in the industrialized countries during the 1970s. The costs of the Vietnam War and the social programs of the Johnson administration, plus the oil prices increases in 1974 by the Organization of Petroleum Exporting Countries (OPEC), contributed to U.S. inflation. By the end of the 1970s the Federal Reserve raised interest rates in an attempt to reduce inflation. Following a recession in the early 1980s, there was renewed growth, somewhat lower interest rates, and a decrease in the inflation rate.

During the early 1990s, a downward business turn created an international recession—without significant deflation—that replaced inflation as a major problem; the Federal Reserve lowered interest rates to stimulate economic growth. The mid-1990s saw moderate inflation (2.5%–3.1% annually), even with an increase in interest rates. By the late 1990s, U.S. inflation was low (1.9% by 1998), despite record growth; it tended to be somewhat higher (roughly 2%–3.5%) in subsequent years, due largely to increases in energy costs and, to a lesser degree, to large government deficits since 2001. Beginning in 2009, however, recession and a lackluster recovery led to much lower rates (typically less than 2%) and even to minor deflation in goods and services at times.


See J. Ahmad, Floating Exchange Rates and World Inflation (1984); A. J. Brown, World Inflation since 1950 (1985); T. S. Sargent, The Conquest of American Inflation (1999); R. J. Samuelson, The Great Inflation and Its Aftermath (2008).

The Columbia Electronic Encyclopedia™ Copyright © 2022, Columbia University Press. Licensed from Columbia University Press. All rights reserved.


(ECONOMICS) a decrease over time in the general level of prices, coupled with an overall reduction in the level of economic activity, new investment, etc. (compare INFLATION). In modern capitalist economies, in which inflation tends to be endemic, deflation is usually relative rather than absolute, involving a reduction in rates of price increase rather than an absolute decrease in prices.
Collins Dictionary of Sociology, 3rd ed. © HarperCollins Publishers 2000
The following article is from The Great Soviet Encyclopedia (1979). It might be outdated or ideologically biased.



the decrease of monetary volume by means of the withdrawal from circulation of excess paper money. Deflation often precedes monetary reforms. Since World War II deflation has most often been encountered as part of the so-called deflation policy of capitalist states, which aims at stopping or decreasing the rates of growth of monetary volume and commodity prices. Deflation is realized through limitation of credits (an increase in the rate of interest, imposition of credit limits), higher taxes, reduction of expenditures for social and cultural needs, a “freeze” on wages and salaries, and other measures carried out by capitalist states. These measures result in a lowering of the rate of economic development, a deterioration in the living conditions of the toiling masses, and an intensification of the class struggle.



the disintegration of rocks and soils owing to wind action, accompanied by the removal and wearing away of the broken particles. Deflation is particularly strong in those parts of deserts from which dominant winds blow (for example, in the southern part of the Karakumy desert). The processes of deflation and physical weathering result in the formation of eroded cliffs with unusual shapes, such as towers, columns, and obelisks.

The Great Soviet Encyclopedia, 3rd Edition (1970-1979). © 2010 The Gale Group, Inc. All rights reserved.


The sweeping erosive action of the wind over the ground.
McGraw-Hill Dictionary of Scientific & Technical Terms, 6E, Copyright © 2003 by The McGraw-Hill Companies, Inc.


1. Economics a reduction in the level of total spending and economic activity resulting in lower levels of output, employment, investment, trade, profits, and prices
2. Geology the removal of loose rock material, sand, and dust by the wind
Collins Discovery Encyclopedia, 1st edition © HarperCollins Publishers 2005
References in periodicals archive ?
So, one important kind of disagreement between deflationists and inflationists about truth will be over the status of the assumptions used in deflationary derivations of problematic generalizations about truth.
Until there is some indication of how the facts about entailment and material implication are to be explained without appeal to truth, inflationists are right to insist that deflationists are not entitled to such premises for explaining facts about truth.
Nonetheless, whether interpreted as a warranted-assertibility theory of truth, or a deflationist, appraisal account rooted in a linguistic ability or technique to endorse legal propositions as justified by the forms of argument, the justificatory aspect of Patterson's view is, at least initially, plausible.
be invoked by a deflationist in formulating deflationism or in
The problem is nothing new, but its importance seems not to have been sufficiently appreciated by deflationists.(17) And it can be appreciated simply by examining obvious facts about the English language.
We cannot capture that by speaking of truth in deflationist terms, without referring to occasions for describing, much less saying how what truth is makes them work in fixing standards.
Rather, deflationists think that no one has yet given a good reason why we need any substantive notion of truth.
Deflationists about meaning-that and believing-that think that such disquotational notions of expressing are the only legitimate ones; inflationists disagree.
Many philosophers believe that a deflationist theory of truth must conservatively extend any base theory to which it is added (roughly, talking about truth should not allow us to establish any new claims about subject-matters not involving truth).
Now, as a deflationist about truth, I'm more than happy to set metaphysicalism aside.
There is an incompatibility between the deflationist approach to truth, which makes truth transparent on the basis of an antecedent grasp of meaning, and the traditional endeavour, exemplified by Davidson, to explicate meaning through truth.