Everything about Reflation totally explained
Reflation is the act of stimulating the
economy by increasing the
money supply or by reducing
taxes. It is the opposite of
disinflation. It can refer to an
economic policy whereby a government uses fiscal or monetary stimulus in order to expand a country's output. This can possibly be achieved by methods that include reducing tax, changing the money supply, or even adjusting
interest rates. Just as disinflation is an acceptable antidote to high inflation, reflation is considered to be an antidote to
deflation (which, unlike inflation, is considered bad regardless how high it is).
Originally it was used to describe a recovery of price to a previous desirable level after a fall caused by a recession. Today it also (in addition to the above) describes the first phase in the recovery of an economy with increasing demand from a slump.
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