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What is the difference between inflation and recession ?

Best Answer - Chosen by Voters Inflation is when prices continue to creep upward, usually as a result of overhe ated economic growth or too much capital in the market chasing too few opportuni ties. A recession is a general slowdown in economic activity over a long period of tim e. During recessions, many macroeconomic indicators vary in a similar way. Produ ction as measured by Gross Domestic Product (GDP), employment, investment spendi ng, capacity utilization, household incomes, business profits and inflation all fall during recessions; bankruptcies and the unemployment rate rises. Inflation is generally not present during recession. In fact dis-inflation happe ns because if recession. Inflation may or may not effect recession, as recession is generally caused by s hortage of money supply and not shortage of production

Inflation is the increase in the volume of money in circulation. It may be physi cal or by credit creation. More money in circulation is more savings, employment , salary, consumption, and a boost to the economy. When it is followed by increa se in production of capital goods, consumer goods more growth is envisaged and m ore employment will be created and savings and investment will be increased. If it is not supported by production of more goods then it leads to consumption alo ne and rise in prices and it has to be corrected by Govt control. The central ba nk intervenes to control the inflationary pressure. Recession is the slowing down of the economic activity. With more production and less buyers there is a tendency to sell at lesser margins and to exploit the ma rket. There is a heavy stock of finished goods in warehouses, heavy dues from de btors, customers defaulting repayment, unpaid bills to creditors and heavy borro wing from banks to meet the expenses and banks not in a position to lend more Pr oduction is reduced to reduce dead stock. The result is the economy will be unemployment and uncertainties. More lock outs , winding ups and bad debts lose of jobs.

1 Inflation is caused by excess demand over supply.Recession is caused by excess supply over demand 2--Inflation reduces the value of your savings as everything costs more.Recessio n only affects savings as interest rates move. 3--Depression comes when the economy stagnates and negative growth occurs 4-Deflation is when things cost less which shouldn't be a bad thing but normaly comes about with high unemployment due to compromised production costs arising f rom lower prices as fixed costs remain the same 5-Inflation occurs because of lack of government control 6-Deflation occurs because of over zealous government controls introduced too la te 7-Depression comes on a Sunday morning, after having excess alcohol on a Saturda y night and waking up to realise who you brought home with you the night before