Here is your short essay on Inflation and Reflation

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Inflation is different from reflation in exactly the same manner as deflation is different from disinflation. Inflation is a situation of rising prices after the full-employment level is reached.

In other words, it is a phenomenon of rising prices without any increase in output and employment. Reflation, on the other hand, is a situation of moderately rising prices when attempts are made to pull the system out of depths of depression.

In the words of G.D. H. Cole, “Reflation may be defined as inflation deliberately undertaken to relieve a depression.”

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Inflation and reflation resemble each other in two respects:

(a) In both, money supply increases,

(b) Both lead to a rise in the price level. But still there are some basic differences between inflation and reflation:

(a) Inflation causes a serious problem of rising prices without any increase in output and employment. Reflation does not create such problem. It rather saves the already shattered economy from the problem of deflation.

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(b) Inflation may be due to natural factors or may be the result of deliberate policy of the government. But, reflation is always adopted by the government as a deliberate policy,

(c) Inflation occurs after the level of full employment, whereas, reflation occurs before the level of full employment.

(d) Prices rise very rapidly under inflation, while they rise very slowly under reflation.

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