Inflation, in simple terms is an increase in the price of commodities like food grains, electronic, vegetables, clothes etc and even services. It also can be a decrease in value for money, so it requires to you to pay more for goods and services. In Contrary, deflation is the downward movement in the average level of price. So inflation is right opposite of deflation. It means everything becomes very cheap. Either way is not good. Price stability is the border between these two. So what are the reasons for inflation? It could be because government printed excess money, less production/ supply of goods due to shortage of labor, materials etc, Money value went down or demand for goods is more than the supply.
Impact:
If the price of goods and services goes up, it directly impacts the common public. They will have to pay more to have their daily bread. So it effects your standard living.
For investors, value of investment will not be sufficient enough. For instance if you had invested Rs.7000 5 years ago and you got a return of 10000 now, it may not be a good return. You would have been able to purchase 8 grams gold with that money 5 years ago, but now you can buy only 4 grams of gold with your total return. Consider the rate of anything else sugar, potato etc 5 years ago and now.
In the case of deflation, prices will go down. People will slow down in buying thinking that the price will go down further.
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