tutor2u | Balancing out Good and Bad Deflation

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Balancing out Good and Bad Deflation

Penny Brooks

19th February 2015

Mark Carney says that a period of low inflation – even deflation – propelled by falling oil prices would be "unambiguously good" for the economy. How do we reconcile this with the textbook position that the economy needs a little bit of inflation, and that deflation is to be avoided? He has also said there were no signs yet of "bad" deflation – what is the difference between 'good' and 'bad' deflation? Can we assess whether it is true to say that deflation is always bad for the economy?

Penny Brooks

Formerly Head of Business and Economics and now Economics teacher, Business and Economics blogger and presenter for Tutor2u, and private tutor

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