Thursday, October 22, 2009

Why don't prices decline during a recession?

Firstly, look at the question. The prices don't decline during a recession. That means that they are not changing, which is, perhaps, impossible, because there is always inflation or deflation in the economy; or the prices are still growing. As we know, growing in prices is inflation. But the main point of inflation, especially inflation rate, is that during a recession inflation is, probably, decreasing, but we have to remember that inflation rate is decreasing and it doesn't mean that inflation decreases. So, during a recession the growing in prices would slow down, but there would not be a declining in prices. We also have to remember that supply for money is expanding, so there would be inflation in the economy.   

No comments:

Post a Comment